Correlation Between Emmaus Life and MediciNova

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

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

Diversification Opportunities for Emmaus Life and MediciNova

-0.48

Correlation Coefficient

Emmaus Life  MediciNova

Very good diversification

The 3 months correlation between Emmaus and MediciNova is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Emmaus Life Sciences and MediciNova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediciNova and Emmaus Life 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 Emmaus Life Sciences are associated (or correlated) with MediciNova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediciNova has no effect on the direction of Emmaus Life i.e., Emmaus Life and MediciNova go up and down completely randomly.

Pair Corralation between Emmaus Life and MediciNova

Given the investment horizon of 90 days Emmaus Life Sciences is expected to under-perform the MediciNova. In addition to that, Emmaus Life is 2.1 times more volatile than MediciNova. It trades about -0.01 of its total potential returns per unit of risk. MediciNova is currently generating about 0.01 per unit of volatility. If you would invest  239.00  in MediciNova on October 11, 2024 and sell it today you would lose (40.00) from holding MediciNova or give up 16.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	25.66%
Values	Daily Returns

Emmaus Life Sciences  vs.  MediciNova

Emmaus Life Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

MediciNova

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MediciNova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Emmaus Life and MediciNova

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

The idea behind Emmaus Life Sciences and MediciNova 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..