Correlation Between Edgewise Therapeutics and Aldeyra

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

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

Diversification Opportunities for Edgewise Therapeutics and Aldeyra

-0.59

Correlation Coefficient

Edgewise Therapeutics  Aldeyra

Excellent diversification

The 3 months correlation between Edgewise and Aldeyra is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra and Edgewise 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 Edgewise Therapeutics 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 Edgewise Therapeutics i.e., Edgewise Therapeutics and Aldeyra go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and Aldeyra

Given the investment horizon of 90 days Edgewise Therapeutics is expected to generate 0.86 times more return on investment than Aldeyra. However, Edgewise Therapeutics is 1.17 times less risky than Aldeyra. It trades about 0.08 of its potential returns per unit of risk. Aldeyra is currently generating about 0.03 per unit of risk. If you would invest  809.00  in Edgewise Therapeutics on September 4, 2024 and sell it today you would earn a total of  2,345  from holding Edgewise Therapeutics or generate 289.86% return on investment over 90 days.

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

Edgewise Therapeutics  vs.  Aldeyra

Edgewise Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewise Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Edgewise Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Aldeyra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aldeyra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental 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.

Pair Trading with Edgewise Therapeutics and Aldeyra

The main advantage of trading using opposite Edgewise Therapeutics and Aldeyra positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Edgewise Therapeutics 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 Edgewise Therapeutics 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..