Correlation Between LadRx and Arch Therapeutics

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

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

Diversification Opportunities for LadRx and Arch Therapeutics

0.0

Correlation Coefficient

LadRx  Arch Therapeutics

Pay attention - limited upside

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

Pair Corralation between LadRx and Arch Therapeutics

If you would invest  26.00  in Arch Therapeutics on December 20, 2024 and sell it today you would lose (3.00) from holding Arch Therapeutics or give up 11.54% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.69%
Values	Daily Returns

LadRx  vs.  Arch Therapeutics

LadRx

Risk-Adjusted Performance

Very Weak

Over the last 90 days LadRx has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, LadRx is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Arch Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Arch Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile basic indicators, Arch Therapeutics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LadRx and Arch Therapeutics

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

The idea behind LadRx and Arch Therapeutics 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.