Correlation Between Praxis Precision and MediciNova

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

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

Diversification Opportunities for Praxis Precision and MediciNova

0.1

Correlation Coefficient

Praxis Precision  MediciNova

Average diversification

The 3 months correlation between Praxis and MediciNova is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Praxis Precision Medicines and MediciNova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MediciNova and Praxis Precision 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 Praxis Precision Medicines are associated (or correlated) with MediciNova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MediciNova has no effect on the direction of Praxis Precision i.e., Praxis Precision and MediciNova go up and down completely randomly.

Pair Corralation between Praxis Precision and MediciNova

Given the investment horizon of 90 days Praxis Precision Medicines is expected to generate 1.51 times more return on investment than MediciNova. However, Praxis Precision is 1.51 times more volatile than MediciNova. It trades about 0.05 of its potential returns per unit of risk. MediciNova is currently generating about 0.01 per unit of risk. If you would invest  5,535  in Praxis Precision Medicines on October 5, 2024 and sell it today you would earn a total of  2,161  from holding Praxis Precision Medicines or generate 39.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.79%
Values	Daily Returns

Praxis Precision Medicines  vs.  MediciNova

Praxis Precision Med

Risk-Adjusted Performance

8 of 100

OK

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

MediciNova

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MediciNova are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, MediciNova showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Praxis Precision and MediciNova

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

The idea behind Praxis Precision Medicines and MediciNova 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.