Correlation Between First Wave and Connect Biopharma

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

By analyzing existing cross correlation between First Wave BioPharma and Connect Biopharma Holdings, you can compare the effects of market volatilities on First Wave and Connect Biopharma 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 First Wave with a short position of Connect Biopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Wave and Connect Biopharma.

Diversification Opportunities for First Wave and Connect Biopharma

0.69

Correlation Coefficient

First Wave  Connect Biopharma

Poor diversification

The 3 months correlation between First and Connect is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Wave BioPharma and Connect Biopharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connect Biopharma and First Wave 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 First Wave BioPharma are associated (or correlated) with Connect Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connect Biopharma has no effect on the direction of First Wave i.e., First Wave and Connect Biopharma go up and down completely randomly.

Pair Corralation between First Wave and Connect Biopharma

If you would invest  105.00  in Connect Biopharma Holdings on September 12, 2024 and sell it today you would earn a total of  18.00  from holding Connect Biopharma Holdings or generate 17.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.55%
Values	Daily Returns

First Wave BioPharma  vs.  Connect Biopharma Holdings

First Wave BioPharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Wave BioPharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, First Wave is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Connect Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Connect Biopharma is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Wave and Connect Biopharma

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

The idea behind First Wave BioPharma and Connect Biopharma Holdings 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.