Correlation Between Kane Biotech and Algernon Pharmaceuticals

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

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

Diversification Opportunities for Kane Biotech and Algernon Pharmaceuticals

0.14

Correlation Coefficient

Kane Biotech  Algernon Pharmaceuticals

Average diversification

The 3 months correlation between Kane and Algernon is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Kane Biotech and Algernon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algernon Pharmaceuticals and Kane Biotech 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 Kane Biotech 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 Kane Biotech i.e., Kane Biotech and Algernon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Kane Biotech and Algernon Pharmaceuticals

Assuming the 90 days horizon Kane Biotech is expected to generate 5.2 times less return on investment than Algernon Pharmaceuticals. But when comparing it to its historical volatility, Kane Biotech is 2.44 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 0.1 of returns per unit of risk over similar time horizon. If you would invest  4.70  in Algernon Pharmaceuticals on December 26, 2024 and sell it today you would earn a total of  1.75  from holding Algernon Pharmaceuticals or generate 37.23% return on investment over 90 days.

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

Kane Biotech  vs.  Algernon Pharmaceuticals

Kane Biotech

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kane Biotech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent forward indicators, Kane Biotech may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Algernon Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Algernon Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algernon Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kane Biotech and Algernon Pharmaceuticals

The main advantage of trading using opposite Kane Biotech and Algernon Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kane Biotech 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 Kane Biotech 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.