Correlation Between Eledon Pharmaceuticals and Biovie

Can any of the company-specific risk be diversified away by investing in both Eledon Pharmaceuticals and Biovie 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 Eledon Pharmaceuticals and Biovie into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Eledon Pharmaceuticals and Biovie Inc, you can compare the effects of market volatilities on Eledon Pharmaceuticals and Biovie 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 Eledon Pharmaceuticals with a short position of Biovie. Check out your portfolio center. Please also check ongoing floating volatility patterns of Eledon Pharmaceuticals and Biovie.

Diversification Opportunities for Eledon Pharmaceuticals and Biovie

0.49

Correlation Coefficient

Eledon Pharmaceuticals  Biovie

Very weak diversification

The 3 months correlation between Eledon and Biovie is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Eledon Pharmaceuticals and Biovie Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biovie Inc and Eledon Pharmaceuticals 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 Eledon Pharmaceuticals are associated (or correlated) with Biovie. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biovie Inc has no effect on the direction of Eledon Pharmaceuticals i.e., Eledon Pharmaceuticals and Biovie go up and down completely randomly.

Pair Corralation between Eledon Pharmaceuticals and Biovie

Given the investment horizon of 90 days Eledon Pharmaceuticals is expected to generate 25.22 times less return on investment than Biovie. But when comparing it to its historical volatility, Eledon Pharmaceuticals is 1.2 times less risky than Biovie. It trades about 0.01 of its potential returns per unit of risk. Biovie Inc is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  251.00  in Biovie Inc on September 5, 2024 and sell it today you would earn a total of  55.00  from holding Biovie Inc or generate 21.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Eledon Pharmaceuticals  vs.  Biovie Inc

Eledon Pharmaceuticals

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eledon Pharmaceuticals are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, Eledon Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Biovie Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Biovie Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Biovie demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eledon Pharmaceuticals and Biovie

The main advantage of trading using opposite Eledon Pharmaceuticals and Biovie positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eledon Pharmaceuticals position performs unexpectedly, Biovie 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 Biovie will offset losses from the drop in Biovie's long position.

The idea behind Eledon Pharmaceuticals and Biovie Inc 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.