Correlation Between First Wave and Eyepoint Pharmaceuticals

Can any of the company-specific risk be diversified away by investing in both First Wave and Eyepoint 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 First Wave and Eyepoint Pharmaceuticals 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 Eyepoint Pharmaceuticals, you can compare the effects of market volatilities on First Wave and Eyepoint 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 First Wave with a short position of Eyepoint Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Wave and Eyepoint Pharmaceuticals.

Diversification Opportunities for First Wave and Eyepoint Pharmaceuticals

-0.27

Correlation Coefficient

First Wave  Eyepoint Pharmaceuticals

Very good diversification

The 3 months correlation between First and Eyepoint is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding First Wave BioPharma and Eyepoint Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eyepoint Pharmaceuticals 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 Eyepoint Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eyepoint Pharmaceuticals has no effect on the direction of First Wave i.e., First Wave and Eyepoint Pharmaceuticals go up and down completely randomly.

Pair Corralation between First Wave and Eyepoint Pharmaceuticals

If you would invest  61.00  in First Wave BioPharma on September 13, 2024 and sell it today you would earn a total of  0.00  from holding First Wave BioPharma or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

First Wave BioPharma  vs.  Eyepoint Pharmaceuticals

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.

Eyepoint Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eyepoint Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Eyepoint Pharmaceuticals is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Wave and Eyepoint Pharmaceuticals

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

The idea behind First Wave BioPharma and Eyepoint 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.