Correlation Between Lexaria Bioscience and NRx Pharmaceuticals

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

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

Diversification Opportunities for Lexaria Bioscience and NRx Pharmaceuticals

0.04

Correlation Coefficient

Lexaria Bioscience  NRx Pharmaceuticals

Significant diversification

The 3 months correlation between Lexaria and NRx is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Lexaria Bioscience Corp and NRx Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRx Pharmaceuticals and Lexaria Bioscience 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 Lexaria Bioscience Corp are associated (or correlated) with NRx Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRx Pharmaceuticals has no effect on the direction of Lexaria Bioscience i.e., Lexaria Bioscience and NRx Pharmaceuticals go up and down completely randomly.

Pair Corralation between Lexaria Bioscience and NRx Pharmaceuticals

Given the investment horizon of 90 days Lexaria Bioscience is expected to generate 1.22 times less return on investment than NRx Pharmaceuticals. But when comparing it to its historical volatility, Lexaria Bioscience Corp is 1.54 times less risky than NRx Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. NRx Pharmaceuticals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  6.50  in NRx Pharmaceuticals on September 18, 2024 and sell it today you would lose (0.07) from holding NRx Pharmaceuticals or give up 1.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.0%
Values	Daily Returns

Lexaria Bioscience Corp  vs.  NRx Pharmaceuticals

Lexaria Bioscience Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lexaria Bioscience Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak 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.

NRx Pharmaceuticals

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NRx Pharmaceuticals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, NRx Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lexaria Bioscience and NRx Pharmaceuticals

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

The idea behind Lexaria Bioscience Corp and NRx 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.