Correlation Between Eton Pharmaceuticals and Aldeyra

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

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

Diversification Opportunities for Eton Pharmaceuticals and Aldeyra

0.17

Correlation Coefficient

Eton Pharmaceuticals  Aldeyra

Average diversification

The 3 months correlation between Eton and Aldeyra is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Eton Pharmaceuticals and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra and Eton 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 Eton Pharmaceuticals are associated (or correlated) with Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of Eton Pharmaceuticals i.e., Eton Pharmaceuticals and Aldeyra go up and down completely randomly.

Pair Corralation between Eton Pharmaceuticals and Aldeyra

Given the investment horizon of 90 days Eton Pharmaceuticals is expected to generate 5.19 times less return on investment than Aldeyra. In addition to that, Eton Pharmaceuticals is 1.01 times more volatile than Aldeyra. It trades about 0.02 of its total potential returns per unit of risk. Aldeyra is currently generating about 0.12 per unit of volatility. If you would invest  502.00  in Aldeyra on December 28, 2024 and sell it today you would earn a total of  165.00  from holding Aldeyra or generate 32.87% return on investment over 90 days.

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

Eton Pharmaceuticals  vs.  Aldeyra

Eton Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Eton Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eton Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Aldeyra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aldeyra are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Aldeyra showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eton Pharmaceuticals and Aldeyra

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

The idea behind Eton Pharmaceuticals and Aldeyra 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.