Correlation Between Processa Pharmaceuticals and ChitogenX

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

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

Diversification Opportunities for Processa Pharmaceuticals and ChitogenX

0.66

Correlation Coefficient

Processa Pharmaceuticals  ChitogenX

Poor diversification

The 3 months correlation between Processa and ChitogenX is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Processa Pharmaceuticals and ChitogenX in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChitogenX and Processa 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 Processa Pharmaceuticals are associated (or correlated) with ChitogenX. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChitogenX has no effect on the direction of Processa Pharmaceuticals i.e., Processa Pharmaceuticals and ChitogenX go up and down completely randomly.

Pair Corralation between Processa Pharmaceuticals and ChitogenX

Given the investment horizon of 90 days Processa Pharmaceuticals is expected to generate 0.72 times more return on investment than ChitogenX. However, Processa Pharmaceuticals is 1.39 times less risky than ChitogenX. It trades about 0.01 of its potential returns per unit of risk. ChitogenX is currently generating about -0.19 per unit of risk. If you would invest  134.00  in Processa Pharmaceuticals on September 13, 2024 and sell it today you would lose (9.00) from holding Processa Pharmaceuticals or give up 6.72% of portfolio value over 90 days.

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

Processa Pharmaceuticals  vs.  ChitogenX

Processa Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

ChitogenX

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChitogenX has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Processa Pharmaceuticals and ChitogenX

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

The idea behind Processa Pharmaceuticals and ChitogenX 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 Global Correlations module to find global opportunities by holding instruments from different markets.