Correlation Between InMed Pharmaceuticals and Novavax

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

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

Diversification Opportunities for InMed Pharmaceuticals and Novavax

-0.11

Correlation Coefficient

InMed Pharmaceuticals  Novavax

Good diversification

The 3 months correlation between InMed and Novavax is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding InMed Pharmaceuticals and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax and InMed 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 InMed Pharmaceuticals are associated (or correlated) with Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of InMed Pharmaceuticals i.e., InMed Pharmaceuticals and Novavax go up and down completely randomly.

Pair Corralation between InMed Pharmaceuticals and Novavax

Considering the 90-day investment horizon InMed Pharmaceuticals is expected to generate 1.35 times more return on investment than Novavax. However, InMed Pharmaceuticals is 1.35 times more volatile than Novavax. It trades about 0.04 of its potential returns per unit of risk. Novavax is currently generating about -0.09 per unit of risk. If you would invest  504.00  in InMed Pharmaceuticals on September 16, 2024 and sell it today you would earn a total of  22.00  from holding InMed Pharmaceuticals or generate 4.37% return on investment over 90 days.

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

InMed Pharmaceuticals  vs.  Novavax

InMed Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in InMed Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, InMed Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Novavax

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Novavax has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with InMed Pharmaceuticals and Novavax

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

The idea behind InMed Pharmaceuticals and Novavax 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.