Correlation Between Edgewise Therapeutics and Champions Oncology

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

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

Diversification Opportunities for Edgewise Therapeutics and Champions Oncology

-0.34

Correlation Coefficient

Edgewise Therapeutics  Champions Oncology

Very good diversification

The 3 months correlation between Edgewise and Champions is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics and Champions Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champions Oncology 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 Champions Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champions Oncology has no effect on the direction of Edgewise Therapeutics i.e., Edgewise Therapeutics and Champions Oncology go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and Champions Oncology

Given the investment horizon of 90 days Edgewise Therapeutics is expected to under-perform the Champions Oncology. But the stock apears to be less risky and, when comparing its historical volatility, Edgewise Therapeutics is 1.4 times less risky than Champions Oncology. The stock trades about -0.01 of its potential returns per unit of risk. The Champions Oncology is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest  427.00  in Champions Oncology on September 22, 2024 and sell it today you would earn a total of  324.00  from holding Champions Oncology or generate 75.88% return on investment over 90 days.

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

Edgewise Therapeutics  vs.  Champions Oncology

Edgewise Therapeutics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewise Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Edgewise Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Champions Oncology

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Champions Oncology are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Champions Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Edgewise Therapeutics and Champions Oncology

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

The idea behind Edgewise Therapeutics and Champions Oncology 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.