Correlation Between Entera Bio and Effector Therapeutics

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

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

Diversification Opportunities for Entera Bio and Effector Therapeutics

-0.13

Correlation Coefficient

Entera Bio  Effector Therapeutics

Good diversification

The 3 months correlation between Entera and Effector is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Entera Bio and Effector Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Effector Therapeutics and Entera Bio 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 Entera Bio are associated (or correlated) with Effector Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Effector Therapeutics has no effect on the direction of Entera Bio i.e., Entera Bio and Effector Therapeutics go up and down completely randomly.

Pair Corralation between Entera Bio and Effector Therapeutics

If you would invest  13.00  in Effector Therapeutics on September 2, 2024 and sell it today you would earn a total of  0.00  from holding Effector Therapeutics or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Entera Bio  vs.  Effector Therapeutics

Entera Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Entera Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

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.

Pair Trading with Entera Bio and Effector Therapeutics

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

The idea behind Entera Bio and Effector Therapeutics 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.