Correlation Between Equillium and Ardelyx

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

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

Diversification Opportunities for Equillium and Ardelyx

0.5

Correlation Coefficient

Equillium  Ardelyx

Very weak diversification

The 3 months correlation between Equillium and Ardelyx is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Ardelyx in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ardelyx and Equillium 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 Equillium are associated (or correlated) with Ardelyx. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ardelyx has no effect on the direction of Equillium i.e., Equillium and Ardelyx go up and down completely randomly.

Pair Corralation between Equillium and Ardelyx

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.71 times more return on investment than Ardelyx. However, Equillium is 1.71 times more volatile than Ardelyx. It trades about 0.01 of its potential returns per unit of risk. Ardelyx is currently generating about -0.05 per unit of risk. If you would invest  93.00  in Equillium on October 7, 2024 and sell it today you would lose (15.00) from holding Equillium or give up 16.13% of portfolio value over 90 days.

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

Equillium  vs.  Ardelyx

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

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

Ardelyx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ardelyx 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 fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Equillium and Ardelyx

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

The idea behind Equillium and Ardelyx 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.