Correlation Between Grace Therapeutics, and TRACON Pharmaceuticals

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

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

Diversification Opportunities for Grace Therapeutics, and TRACON Pharmaceuticals

-0.57

Correlation Coefficient

Grace Therapeutics,  TRACON Pharmaceuticals

Excellent diversification

The 3 months correlation between Grace and TRACON is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Grace Therapeutics, and TRACON Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRACON Pharmaceuticals and Grace 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 Grace Therapeutics, are associated (or correlated) with TRACON Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRACON Pharmaceuticals has no effect on the direction of Grace Therapeutics, i.e., Grace Therapeutics, and TRACON Pharmaceuticals go up and down completely randomly.

Pair Corralation between Grace Therapeutics, and TRACON Pharmaceuticals

Given the investment horizon of 90 days Grace Therapeutics, is expected to generate 0.42 times more return on investment than TRACON Pharmaceuticals. However, Grace Therapeutics, is 2.37 times less risky than TRACON Pharmaceuticals. It trades about 0.07 of its potential returns per unit of risk. TRACON Pharmaceuticals is currently generating about 0.0 per unit of risk. If you would invest  208.00  in Grace Therapeutics, on September 23, 2024 and sell it today you would earn a total of  174.00  from holding Grace Therapeutics, or generate 83.65% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	54.81%
Values	Daily Returns

Grace Therapeutics,  vs.  TRACON Pharmaceuticals

Grace Therapeutics,

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Grace Therapeutics, are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Grace Therapeutics, exhibited solid returns over the last few months and may actually be approaching a breakup point.

TRACON Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Grace Therapeutics, and TRACON Pharmaceuticals

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

The idea behind Grace Therapeutics, and TRACON 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.