Correlation Between MediciNova and Editas Medicine

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

By analyzing existing cross correlation between MediciNova and Editas Medicine, you can compare the effects of market volatilities on MediciNova and Editas Medicine 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 Editas Medicine. Check out your portfolio center. Please also check ongoing floating volatility patterns of MediciNova and Editas Medicine.

Diversification Opportunities for MediciNova and Editas Medicine

-0.4

Correlation Coefficient

MediciNova  Editas Medicine

Very good diversification

The 3 months correlation between MediciNova and Editas is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding MediciNova and Editas Medicine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Editas Medicine 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 Editas Medicine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Editas Medicine has no effect on the direction of MediciNova i.e., MediciNova and Editas Medicine go up and down completely randomly.

Pair Corralation between MediciNova and Editas Medicine

Given the investment horizon of 90 days MediciNova is expected to generate 2.67 times more return on investment than Editas Medicine. However, MediciNova is 2.67 times more volatile than Editas Medicine. It trades about 0.17 of its potential returns per unit of risk. Editas Medicine is currently generating about -0.36 per unit of risk. If you would invest  168.00  in MediciNova on September 5, 2024 and sell it today you would earn a total of  62.00  from holding MediciNova or generate 36.9% 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.  Editas Medicine

MediciNova

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 6 (%) 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.

Editas Medicine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Editas Medicine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with MediciNova and Editas Medicine

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

The idea behind MediciNova and Editas Medicine 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.