Correlation Between Arcus Biosciences and Adagene

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

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

Diversification Opportunities for Arcus Biosciences and Adagene

0.17

Correlation Coefficient

Arcus Biosciences  Adagene

Average diversification

The 3 months correlation between Arcus and Adagene is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Arcus Biosciences and Adagene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adagene and Arcus Biosciences 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 Arcus Biosciences are associated (or correlated) with Adagene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adagene has no effect on the direction of Arcus Biosciences i.e., Arcus Biosciences and Adagene go up and down completely randomly.

Pair Corralation between Arcus Biosciences and Adagene

Given the investment horizon of 90 days Arcus Biosciences is expected to under-perform the Adagene. But the stock apears to be less risky and, when comparing its historical volatility, Arcus Biosciences is 1.11 times less risky than Adagene. The stock trades about -0.4 of its potential returns per unit of risk. The Adagene is currently generating about -0.13 of returns per unit of risk over similar time horizon. If you would invest  212.00  in Adagene on October 12, 2024 and sell it today you would lose (18.00) from holding Adagene or give up 8.49% of portfolio value over 90 days.

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

Arcus Biosciences  vs.  Adagene

Arcus Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcus Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Adagene

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arcus Biosciences and Adagene

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

The idea behind Arcus Biosciences and Adagene 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.