Correlation Between Grom Social and Dermata Therapeutics

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

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

Diversification Opportunities for Grom Social and Dermata Therapeutics

0.0

Correlation Coefficient

Grom Social  Dermata Therapeutics

Pay attention - limited upside

The 3 months correlation between Grom and Dermata is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Grom Social Enterprises and Dermata Therapeutics Warrant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dermata Therapeutics and Grom Social 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 Grom Social Enterprises are associated (or correlated) with Dermata Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dermata Therapeutics has no effect on the direction of Grom Social i.e., Grom Social and Dermata Therapeutics go up and down completely randomly.

Pair Corralation between Grom Social and Dermata Therapeutics

If you would invest  4.00  in Dermata Therapeutics Warrant on December 3, 2024 and sell it today you would lose (1.55) from holding Dermata Therapeutics Warrant or give up 38.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Grom Social Enterprises  vs.  Dermata Therapeutics Warrant

Grom Social Enterprises

Risk-Adjusted Performance

Very Weak

Over the last 90 days Grom Social Enterprises has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable primary indicators, Grom Social is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Dermata Therapeutics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dermata Therapeutics Warrant are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Dermata Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Grom Social and Dermata Therapeutics

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

The idea behind Grom Social Enterprises and Dermata Therapeutics Warrant 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.