Correlation Between MediciNova and Polarityte

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

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

Diversification Opportunities for MediciNova and Polarityte

-0.74

Correlation Coefficient

MediciNova  Polarityte

Pay attention - limited upside

The 3 months correlation between MediciNova and Polarityte is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding MediciNova and Polarityte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Polarityte 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 Polarityte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Polarityte has no effect on the direction of MediciNova i.e., MediciNova and Polarityte go up and down completely randomly.

Pair Corralation between MediciNova and Polarityte

Given the investment horizon of 90 days MediciNova is expected to generate 0.37 times more return on investment than Polarityte. However, MediciNova is 2.72 times less risky than Polarityte. It trades about 0.01 of its potential returns per unit of risk. Polarityte is currently generating about -0.11 per unit of risk. If you would invest  239.00  in MediciNova on October 11, 2024 and sell it today you would lose (40.00) from holding MediciNova or give up 16.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	25.86%
Values	Daily Returns

MediciNova  vs.  Polarityte

MediciNova

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 4 (%) 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.

Polarityte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polarityte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Polarityte is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with MediciNova and Polarityte

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

The idea behind MediciNova and Polarityte 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.