Correlation Between NovaBay Pharmaceuticals and Baudax Bio

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

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

Diversification Opportunities for NovaBay Pharmaceuticals and Baudax Bio

0.0

Correlation Coefficient

NovaBay Pharmaceuticals  Baudax Bio

Pay attention - limited upside

The 3 months correlation between NovaBay and Baudax is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NovaBay Pharmaceuticals and Baudax Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Baudax Bio and NovaBay 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 NovaBay Pharmaceuticals are associated (or correlated) with Baudax Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Baudax Bio has no effect on the direction of NovaBay Pharmaceuticals i.e., NovaBay Pharmaceuticals and Baudax Bio go up and down completely randomly.

Pair Corralation between NovaBay Pharmaceuticals and Baudax Bio

If you would invest  50.00  in NovaBay Pharmaceuticals on December 19, 2024 and sell it today you would earn a total of  13.00  from holding NovaBay Pharmaceuticals or generate 26.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

NovaBay Pharmaceuticals  vs.  Baudax Bio

NovaBay Pharmaceuticals

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NovaBay Pharmaceuticals are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, NovaBay Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Baudax Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Baudax Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Baudax Bio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NovaBay Pharmaceuticals and Baudax Bio

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

The idea behind NovaBay Pharmaceuticals and Baudax Bio 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.