Correlation Between Sonnet Biotherapeutics and Quoin Pharmaceuticals

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

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

Diversification Opportunities for Sonnet Biotherapeutics and Quoin Pharmaceuticals

-0.17

Correlation Coefficient

Sonnet Biotherapeutics  Quoin Pharmaceuticals

Good diversification

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

Pair Corralation between Sonnet Biotherapeutics and Quoin Pharmaceuticals

Given the investment horizon of 90 days Sonnet Biotherapeutics Holdings is expected to under-perform the Quoin Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Sonnet Biotherapeutics Holdings is 1.32 times less risky than Quoin Pharmaceuticals. The stock trades about -0.2 of its potential returns per unit of risk. The Quoin Pharmaceuticals Ltd is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  65.00  in Quoin Pharmaceuticals Ltd on September 12, 2024 and sell it today you would earn a total of  8.10  from holding Quoin Pharmaceuticals Ltd or generate 12.46% return on investment over 90 days.

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

Sonnet Biotherapeutics Holding  vs.  Quoin Pharmaceuticals Ltd

Sonnet Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sonnet Biotherapeutics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Quoin Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quoin Pharmaceuticals Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Quoin Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonnet Biotherapeutics and Quoin Pharmaceuticals

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

The idea behind Sonnet Biotherapeutics Holdings and Quoin Pharmaceuticals Ltd 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.