Correlation Between Eterna Therapeutics and Praxis Precision

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

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

Diversification Opportunities for Eterna Therapeutics and Praxis Precision

0.43

Correlation Coefficient

Eterna Therapeutics  Praxis Precision

Very weak diversification

The 3 months correlation between Eterna and Praxis is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Eterna Therapeutics and Praxis Precision Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Praxis Precision Med and Eterna Therapeutics 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 Eterna Therapeutics are associated (or correlated) with Praxis Precision. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Praxis Precision Med has no effect on the direction of Eterna Therapeutics i.e., Eterna Therapeutics and Praxis Precision go up and down completely randomly.

Pair Corralation between Eterna Therapeutics and Praxis Precision

Given the investment horizon of 90 days Eterna Therapeutics is expected to generate 1.56 times more return on investment than Praxis Precision. However, Eterna Therapeutics is 1.56 times more volatile than Praxis Precision Medicines. It trades about 0.03 of its potential returns per unit of risk. Praxis Precision Medicines is currently generating about -0.14 per unit of risk. If you would invest  28.00  in Eterna Therapeutics on December 26, 2024 and sell it today you would lose (3.00) from holding Eterna Therapeutics or give up 10.71% of portfolio value over 90 days.

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

Eterna Therapeutics  vs.  Praxis Precision Medicines

Eterna Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eterna Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Eterna Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Praxis Precision Med

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Eterna Therapeutics and Praxis Precision

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

The idea behind Eterna Therapeutics and Praxis Precision Medicines 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.