Correlation Between MediciNova and Conduit Pharmaceuticals

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

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

Diversification Opportunities for MediciNova and Conduit Pharmaceuticals

-0.45

Correlation Coefficient

MediciNova  Conduit Pharmaceuticals

Very good diversification

The 3 months correlation between MediciNova and Conduit is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding MediciNova and Conduit Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conduit Pharmaceuticals and MediciNova 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 MediciNova are associated (or correlated) with Conduit Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conduit Pharmaceuticals has no effect on the direction of MediciNova i.e., MediciNova and Conduit Pharmaceuticals go up and down completely randomly.

Pair Corralation between MediciNova and Conduit Pharmaceuticals

Given the investment horizon of 90 days MediciNova is expected to generate 0.77 times more return on investment than Conduit Pharmaceuticals. However, MediciNova is 1.3 times less risky than Conduit Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Conduit Pharmaceuticals is currently generating about -0.01 per unit of risk. If you would invest  199.00  in MediciNova on October 7, 2024 and sell it today you would earn a total of  14.00  from holding MediciNova or generate 7.04% return on investment over 90 days.

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

MediciNova  vs.  Conduit Pharmaceuticals

MediciNova

Risk-Adjusted Performance

3 of 100

Insignificant

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

Conduit Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Conduit Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, Conduit Pharmaceuticals is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with MediciNova and Conduit Pharmaceuticals

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

The idea behind MediciNova and Conduit 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.