Correlation Between Freeline Therapeutics and Algernon Pharmaceuticals

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

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

Diversification Opportunities for Freeline Therapeutics and Algernon Pharmaceuticals

0.39

Correlation Coefficient

Freeline Therapeutics  Algernon Pharmaceuticals

Weak diversification

The 3 months correlation between Freeline and Algernon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Freeline Therapeutics Holdings and Algernon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algernon Pharmaceuticals and Freeline 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 Freeline Therapeutics Holdings are associated (or correlated) with Algernon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algernon Pharmaceuticals has no effect on the direction of Freeline Therapeutics i.e., Freeline Therapeutics and Algernon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Freeline Therapeutics and Algernon Pharmaceuticals

If you would invest  7.00  in Algernon Pharmaceuticals on October 20, 2024 and sell it today you would lose (2.00) from holding Algernon Pharmaceuticals or give up 28.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	0.78%
Values	Daily Returns

Freeline Therapeutics Holdings  vs.  Algernon Pharmaceuticals

Freeline Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeline Therapeutics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Freeline Therapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Algernon Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Algernon Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algernon Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Freeline Therapeutics and Algernon Pharmaceuticals

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

The idea behind Freeline Therapeutics Holdings and Algernon Pharmaceuticals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.