Correlation Between Guardforce and Pasithea Therapeutics

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

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

Diversification Opportunities for Guardforce and Pasithea Therapeutics

0.38

Correlation Coefficient

Guardforce  Pasithea Therapeutics

Weak diversification

The 3 months correlation between Guardforce and Pasithea is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Guardforce AI Co and Pasithea Therapeutics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pasithea Therapeutics and Guardforce 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 Guardforce AI Co are associated (or correlated) with Pasithea Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pasithea Therapeutics has no effect on the direction of Guardforce i.e., Guardforce and Pasithea Therapeutics go up and down completely randomly.

Pair Corralation between Guardforce and Pasithea Therapeutics

Given the investment horizon of 90 days Guardforce AI Co is expected to under-perform the Pasithea Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Guardforce AI Co is 1.88 times less risky than Pasithea Therapeutics. The stock trades about -0.01 of its potential returns per unit of risk. The Pasithea Therapeutics Corp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2.01  in Pasithea Therapeutics Corp on December 30, 2024 and sell it today you would lose (0.19) from holding Pasithea Therapeutics Corp or give up 9.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	46.77%
Values	Daily Returns

Guardforce AI Co  vs.  Pasithea Therapeutics Corp

Guardforce AI

Risk-Adjusted Performance

Very Weak

Over the last 90 days Guardforce AI Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pasithea Therapeutics

Risk-Adjusted Performance

Modest

Over the last 90 days Pasithea Therapeutics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Pasithea Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Guardforce and Pasithea Therapeutics

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

The idea behind Guardforce AI Co and Pasithea Therapeutics Corp 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.