Correlation Between Sonoma Pharmaceuticals and Alimera Sciences

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

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

Diversification Opportunities for Sonoma Pharmaceuticals and Alimera Sciences

-0.06

Correlation Coefficient

Sonoma Pharmaceuticals  Alimera Sciences

Good diversification

The 3 months correlation between Sonoma and Alimera is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Sonoma Pharmaceuticals and Alimera Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alimera Sciences and Sonoma 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 Sonoma Pharmaceuticals are associated (or correlated) with Alimera Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alimera Sciences has no effect on the direction of Sonoma Pharmaceuticals i.e., Sonoma Pharmaceuticals and Alimera Sciences go up and down completely randomly.

Pair Corralation between Sonoma Pharmaceuticals and Alimera Sciences

If you would invest  554.00  in Alimera Sciences on October 8, 2024 and sell it today you would earn a total of  0.00  from holding Alimera Sciences or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.26%
Values	Daily Returns

Sonoma Pharmaceuticals  vs.  Alimera Sciences

Sonoma Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonoma Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Sonoma Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Alimera Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alimera Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Alimera Sciences is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sonoma Pharmaceuticals and Alimera Sciences

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

The idea behind Sonoma Pharmaceuticals and Alimera Sciences 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.