Correlation Between NLS Pharmaceutics and Equillium

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

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

Diversification Opportunities for NLS Pharmaceutics and Equillium

0.16

Correlation Coefficient

NLS Pharmaceutics  Equillium

Average diversification

The 3 months correlation between NLS and Equillium is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding NLS Pharmaceutics AG and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium and NLS Pharmaceutics 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 NLS Pharmaceutics AG are associated (or correlated) with Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of NLS Pharmaceutics i.e., NLS Pharmaceutics and Equillium go up and down completely randomly.

Pair Corralation between NLS Pharmaceutics and Equillium

Assuming the 90 days horizon NLS Pharmaceutics AG is expected to generate 3.5 times more return on investment than Equillium. However, NLS Pharmaceutics is 3.5 times more volatile than Equillium. It trades about 0.06 of its potential returns per unit of risk. Equillium is currently generating about 0.11 per unit of risk. If you would invest  1.90  in NLS Pharmaceutics AG on December 21, 2024 and sell it today you would lose (0.80) from holding NLS Pharmaceutics AG or give up 42.11% of portfolio value over 90 days.

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

NLS Pharmaceutics AG  vs.  Equillium

NLS Pharmaceutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NLS Pharmaceutics AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, NLS Pharmaceutics showed solid returns over the last few months and may actually be approaching a breakup point.

Equillium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NLS Pharmaceutics and Equillium

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

The idea behind NLS Pharmaceutics AG and Equillium 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..