Correlation Between Arcus Biosciences and Aldeyra

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

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

Diversification Opportunities for Arcus Biosciences and Aldeyra

0.41

Correlation Coefficient

Arcus Biosciences  Aldeyra

Very weak diversification

The 3 months correlation between Arcus and Aldeyra is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Arcus Biosciences and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra 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 Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of Arcus Biosciences i.e., Arcus Biosciences and Aldeyra go up and down completely randomly.

Pair Corralation between Arcus Biosciences and Aldeyra

Given the investment horizon of 90 days Arcus Biosciences is expected to generate 7.93 times less return on investment than Aldeyra. But when comparing it to its historical volatility, Arcus Biosciences is 1.35 times less risky than Aldeyra. It trades about 0.01 of its potential returns per unit of risk. Aldeyra is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  333.00  in Aldeyra on September 23, 2024 and sell it today you would earn a total of  155.00  from holding Aldeyra or generate 46.55% return on investment over 90 days.

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

Arcus Biosciences  vs.  Aldeyra

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 comparatively stable basic indicators, Arcus Biosciences is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Aldeyra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aldeyra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Arcus Biosciences and Aldeyra

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

The idea behind Arcus Biosciences and Aldeyra 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.