Correlation Between INMED PHARMACEUTICALS and Pure Storage

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

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

Diversification Opportunities for INMED PHARMACEUTICALS and Pure Storage

0.45

Correlation Coefficient

INMED PHARMACEUTICALS  Pure Storage

Very weak diversification

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

Pair Corralation between INMED PHARMACEUTICALS and Pure Storage

Assuming the 90 days trading horizon INMED PHARMACEUTICALS INC is expected to generate 5.36 times more return on investment than Pure Storage. However, INMED PHARMACEUTICALS is 5.36 times more volatile than Pure Storage. It trades about 0.02 of its potential returns per unit of risk. Pure Storage is currently generating about 0.07 per unit of risk. If you would invest  3,800  in INMED PHARMACEUTICALS INC on September 29, 2024 and sell it today you would lose (3,383) from holding INMED PHARMACEUTICALS INC or give up 89.03% of portfolio value over 90 days.

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

INMED PHARMACEUTICALS INC  vs.  Pure Storage

INMED PHARMACEUTICALS INC

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in INMED PHARMACEUTICALS INC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, INMED PHARMACEUTICALS reported solid returns over the last few months and may actually be approaching a breakup point.

Pure Storage

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pure Storage are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pure Storage reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INMED PHARMACEUTICALS and Pure Storage

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

The idea behind INMED PHARMACEUTICALS INC and Pure Storage 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.