Correlation Between LadRx and NovaBay Pharmaceuticals

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

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

Diversification Opportunities for LadRx and NovaBay Pharmaceuticals

0.34

Correlation Coefficient

LadRx  NovaBay Pharmaceuticals

Weak diversification

The 3 months correlation between LadRx and NovaBay is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding LadRx and NovaBay Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaBay Pharmaceuticals 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 NovaBay Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NovaBay Pharmaceuticals has no effect on the direction of LadRx i.e., LadRx and NovaBay Pharmaceuticals go up and down completely randomly.

Pair Corralation between LadRx and NovaBay Pharmaceuticals

Given the investment horizon of 90 days LadRx is expected to generate 1.28 times more return on investment than NovaBay Pharmaceuticals. However, LadRx is 1.28 times more volatile than NovaBay Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. NovaBay Pharmaceuticals is currently generating about -0.08 per unit of risk. If you would invest  235.00  in LadRx on October 22, 2024 and sell it today you would earn a total of  2.00  from holding LadRx or generate 0.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.35%
Values	Daily Returns

LadRx  vs.  NovaBay Pharmaceuticals

LadRx

Risk-Adjusted Performance

0 of 100

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.

NovaBay Pharmaceuticals

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NovaBay Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, NovaBay Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with LadRx and NovaBay Pharmaceuticals

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

The idea behind LadRx and NovaBay 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.