Correlation Between Tandem Diabetes and Aquestive Therapeutics

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

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

Diversification Opportunities for Tandem Diabetes and Aquestive Therapeutics

0.57

Correlation Coefficient

Tandem Diabetes  Aquestive Therapeutics

Very weak diversification

The 3 months correlation between Tandem and Aquestive is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Tandem Diabetes Care and Aquestive Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aquestive Therapeutics and Tandem Diabetes 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 Tandem Diabetes Care are associated (or correlated) with Aquestive Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aquestive Therapeutics has no effect on the direction of Tandem Diabetes i.e., Tandem Diabetes and Aquestive Therapeutics go up and down completely randomly.

Pair Corralation between Tandem Diabetes and Aquestive Therapeutics

Given the investment horizon of 90 days Tandem Diabetes Care is expected to under-perform the Aquestive Therapeutics. In addition to that, Tandem Diabetes is 1.21 times more volatile than Aquestive Therapeutics. It trades about -0.17 of its total potential returns per unit of risk. Aquestive Therapeutics is currently generating about -0.04 per unit of volatility. If you would invest  352.00  in Aquestive Therapeutics on December 30, 2024 and sell it today you would lose (50.00) from holding Aquestive Therapeutics or give up 14.2% of portfolio value over 90 days.

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

Tandem Diabetes Care  vs.  Aquestive Therapeutics

Tandem Diabetes Care

Risk-Adjusted Performance

Very Weak

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

Aquestive Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aquestive Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Tandem Diabetes and Aquestive Therapeutics

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

The idea behind Tandem Diabetes Care and Aquestive Therapeutics 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.