Correlation Between Eledon Pharmaceuticals and Spruce Biosciences

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

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

Diversification Opportunities for Eledon Pharmaceuticals and Spruce Biosciences

0.09

Correlation Coefficient

Eledon Pharmaceuticals  Spruce Biosciences

Significant diversification

The 3 months correlation between Eledon and Spruce is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Eledon Pharmaceuticals and Spruce Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spruce Biosciences 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 Spruce Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spruce Biosciences has no effect on the direction of Eledon Pharmaceuticals i.e., Eledon Pharmaceuticals and Spruce Biosciences go up and down completely randomly.

Pair Corralation between Eledon Pharmaceuticals and Spruce Biosciences

Given the investment horizon of 90 days Eledon Pharmaceuticals is expected to generate 0.7 times more return on investment than Spruce Biosciences. However, Eledon Pharmaceuticals is 1.42 times less risky than Spruce Biosciences. It trades about -0.06 of its potential returns per unit of risk. Spruce Biosciences is currently generating about -0.23 per unit of risk. If you would invest  485.00  in Eledon Pharmaceuticals on October 10, 2024 and sell it today you would lose (34.00) from holding Eledon Pharmaceuticals or give up 7.01% of portfolio value over 90 days.

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

Eledon Pharmaceuticals  vs.  Spruce Biosciences

Eledon Pharmaceuticals

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eledon Pharmaceuticals are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Eledon Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Spruce Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spruce Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Spruce Biosciences is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Eledon Pharmaceuticals and Spruce Biosciences

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

The idea behind Eledon Pharmaceuticals and Spruce Biosciences 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.