Correlation Between Quoin Pharmaceuticals and Magenta Therapeutics

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

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

Diversification Opportunities for Quoin Pharmaceuticals and Magenta Therapeutics

-0.5

Correlation Coefficient

Quoin Pharmaceuticals  Magenta Therapeutics

Very good diversification

The 3 months correlation between Quoin and Magenta is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Quoin Pharmaceuticals Ltd and Magenta Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magenta Therapeutics and Quoin 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 Quoin Pharmaceuticals Ltd are associated (or correlated) with Magenta Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magenta Therapeutics has no effect on the direction of Quoin Pharmaceuticals i.e., Quoin Pharmaceuticals and Magenta Therapeutics go up and down completely randomly.

Pair Corralation between Quoin Pharmaceuticals and Magenta Therapeutics

Given the investment horizon of 90 days Quoin Pharmaceuticals Ltd is expected to under-perform the Magenta Therapeutics. In addition to that, Quoin Pharmaceuticals is 1.25 times more volatile than Magenta Therapeutics. It trades about -0.05 of its total potential returns per unit of risk. Magenta Therapeutics is currently generating about 0.09 per unit of volatility. If you would invest  49.00  in Magenta Therapeutics on October 10, 2024 and sell it today you would earn a total of  33.00  from holding Magenta Therapeutics or generate 67.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	26.01%
Values	Daily Returns

Quoin Pharmaceuticals Ltd  vs.  Magenta Therapeutics

Quoin Pharmaceuticals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Quoin Pharmaceuticals Ltd are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Quoin Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Magenta Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Quoin Pharmaceuticals and Magenta Therapeutics

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

The idea behind Quoin Pharmaceuticals Ltd and Magenta Therapeutics 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.