Correlation Between Effector Therapeutics and Acumen Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both Effector Therapeutics and Acumen Pharmaceuticals at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Effector Therapeutics and Acumen Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Effector Therapeutics and Acumen Pharmaceuticals, you can compare the effects of market volatilities on Effector Therapeutics and Acumen Pharmaceuticals and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Effector Therapeutics with a short position of Acumen Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Effector Therapeutics and Acumen Pharmaceuticals.

Diversification Opportunities for Effector Therapeutics and Acumen Pharmaceuticals

0.15

Correlation Coefficient

Effector Therapeutics  Acumen Pharmaceuticals

Average diversification

The 3 months correlation between Effector and Acumen is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Effector Therapeutics and Acumen Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acumen Pharmaceuticals and Effector Therapeutics is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Effector Therapeutics are associated (or correlated) with Acumen Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acumen Pharmaceuticals has no effect on the direction of Effector Therapeutics i.e., Effector Therapeutics and Acumen Pharmaceuticals go up and down completely randomly.

Pair Corralation between Effector Therapeutics and Acumen Pharmaceuticals

Given the investment horizon of 90 days Effector Therapeutics is expected to under-perform the Acumen Pharmaceuticals. In addition to that, Effector Therapeutics is 1.63 times more volatile than Acumen Pharmaceuticals. It trades about -0.07 of its total potential returns per unit of risk. Acumen Pharmaceuticals is currently generating about -0.02 per unit of volatility. If you would invest  582.00  in Acumen Pharmaceuticals on October 1, 2024 and sell it today you would lose (404.00) from holding Acumen Pharmaceuticals or give up 69.42% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	74.11%
Values	Daily Returns

Effector Therapeutics  vs.  Acumen Pharmaceuticals

Effector Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Effector Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Effector Therapeutics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Acumen Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acumen Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Effector Therapeutics and Acumen Pharmaceuticals

The main advantage of trading using opposite Effector Therapeutics and Acumen Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Effector Therapeutics position performs unexpectedly, Acumen Pharmaceuticals can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Acumen Pharmaceuticals will offset losses from the drop in Acumen Pharmaceuticals' long position.

The idea behind Effector Therapeutics and Acumen Pharmaceuticals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stocks Directory module to find actively traded stocks across global markets.