Correlation Between Rigel Pharmaceuticals and Algernon Pharmaceuticals

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

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

Diversification Opportunities for Rigel Pharmaceuticals and Algernon Pharmaceuticals

-0.48

Correlation Coefficient

Rigel Pharmaceuticals  Algernon Pharmaceuticals

Very good diversification

The 3 months correlation between Rigel and Algernon is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Rigel Pharmaceuticals and Algernon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algernon Pharmaceuticals and Rigel 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 Rigel Pharmaceuticals are associated (or correlated) with Algernon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algernon Pharmaceuticals has no effect on the direction of Rigel Pharmaceuticals i.e., Rigel Pharmaceuticals and Algernon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Rigel Pharmaceuticals and Algernon Pharmaceuticals

Given the investment horizon of 90 days Rigel Pharmaceuticals is expected to generate 0.65 times more return on investment than Algernon Pharmaceuticals. However, Rigel Pharmaceuticals is 1.54 times less risky than Algernon Pharmaceuticals. It trades about 0.2 of its potential returns per unit of risk. Algernon Pharmaceuticals is currently generating about -0.01 per unit of risk. If you would invest  1,312  in Rigel Pharmaceuticals on August 31, 2024 and sell it today you would earn a total of  1,449  from holding Rigel Pharmaceuticals or generate 110.44% return on investment over 90 days.

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

Rigel Pharmaceuticals  vs.  Algernon Pharmaceuticals

Rigel Pharmaceuticals

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Rigel Pharmaceuticals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Rigel Pharmaceuticals disclosed solid returns over the last few months and may actually be approaching a breakup point.

Algernon Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Rigel Pharmaceuticals and Algernon Pharmaceuticals

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

The idea behind Rigel Pharmaceuticals and Algernon 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.