Correlation Between Intercept Pharmaceuticals and Reata Pharmaceuticals

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

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

Diversification Opportunities for Intercept Pharmaceuticals and Reata Pharmaceuticals

0.0

Correlation Coefficient

Intercept Pharmaceuticals  Reata Pharmaceuticals

Pay attention - limited upside

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

Pair Corralation between Intercept Pharmaceuticals and Reata Pharmaceuticals

If you would invest (100.00) in Reata Pharmaceuticals on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Reata Pharmaceuticals or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Intercept Pharmaceuticals  vs.  Reata Pharmaceuticals

Intercept Pharmaceuticals

Risk-Adjusted Performance

Very Weak

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

Reata Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reata Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reata Pharmaceuticals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Intercept Pharmaceuticals and Reata Pharmaceuticals

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

The idea behind Intercept Pharmaceuticals and Reata 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.