Correlation Between GH Research and Algernon Pharmaceuticals

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

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

Diversification Opportunities for GH Research and Algernon Pharmaceuticals

0.02

Correlation Coefficient

GH Research  Algernon Pharmaceuticals

Significant diversification

The 3 months correlation between GHRS and Algernon is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding GH Research PLC and Algernon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algernon Pharmaceuticals and GH Research 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 GH Research PLC 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 GH Research i.e., GH Research and Algernon Pharmaceuticals go up and down completely randomly.

Pair Corralation between GH Research and Algernon Pharmaceuticals

Given the investment horizon of 90 days GH Research is expected to generate 1.71 times less return on investment than Algernon Pharmaceuticals. But when comparing it to its historical volatility, GH Research PLC is 2.13 times less risky than Algernon Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Algernon Pharmaceuticals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.60  in Algernon Pharmaceuticals on October 5, 2024 and sell it today you would lose (0.97) from holding Algernon Pharmaceuticals or give up 17.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.63%
Values	Daily Returns

GH Research PLC  vs.  Algernon Pharmaceuticals

GH Research PLC

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GH Research PLC are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, GH Research unveiled solid returns over the last few months and may actually be approaching a breakup point.

Algernon Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algernon Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algernon Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with GH Research and Algernon Pharmaceuticals

The main advantage of trading using opposite GH Research and Algernon Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GH Research 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 GH Research PLC 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.

Check out your portfolio center.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.