Correlation Between Polydex Pharmaceuticals and Xenon Pharmaceuticals

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

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

Diversification Opportunities for Polydex Pharmaceuticals and Xenon Pharmaceuticals

0.05

Correlation Coefficient

Polydex Pharmaceuticals  Xenon Pharmaceuticals

Significant diversification

The 3 months correlation between Polydex and Xenon is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Polydex Pharmaceuticals and Xenon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenon Pharmaceuticals and Polydex 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 Polydex Pharmaceuticals are associated (or correlated) with Xenon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenon Pharmaceuticals has no effect on the direction of Polydex Pharmaceuticals i.e., Polydex Pharmaceuticals and Xenon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Polydex Pharmaceuticals and Xenon Pharmaceuticals

If you would invest  196.00  in Polydex Pharmaceuticals on October 7, 2024 and sell it today you would earn a total of  0.00  from holding Polydex Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Polydex Pharmaceuticals  vs.  Xenon Pharmaceuticals

Polydex Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Polydex Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Polydex Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

Xenon Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Polydex Pharmaceuticals and Xenon Pharmaceuticals

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

The idea behind Polydex Pharmaceuticals and Xenon Pharmaceuticals 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.