Correlation Between TRACON Pharmaceuticals and NovaBay Pharmaceuticals

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

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

Diversification Opportunities for TRACON Pharmaceuticals and NovaBay Pharmaceuticals

0.26

Correlation Coefficient

TRACON Pharmaceuticals  NovaBay Pharmaceuticals

Modest diversification

The 3 months correlation between TRACON and NovaBay is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding TRACON Pharmaceuticals and NovaBay Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaBay Pharmaceuticals and TRACON 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 TRACON Pharmaceuticals are associated (or correlated) with NovaBay Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NovaBay Pharmaceuticals has no effect on the direction of TRACON Pharmaceuticals i.e., TRACON Pharmaceuticals and NovaBay Pharmaceuticals go up and down completely randomly.

Pair Corralation between TRACON Pharmaceuticals and NovaBay Pharmaceuticals

If you would invest  160.00  in TRACON Pharmaceuticals on September 23, 2024 and sell it today you would earn a total of  0.00  from holding TRACON Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

TRACON Pharmaceuticals  vs.  NovaBay Pharmaceuticals

TRACON Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

NovaBay Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NovaBay Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with TRACON Pharmaceuticals and NovaBay Pharmaceuticals

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

The idea behind TRACON Pharmaceuticals and NovaBay 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.