Correlation Between Therapeutic Solutions and Adagene

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

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

Diversification Opportunities for Therapeutic Solutions and Adagene

0.02

Correlation Coefficient

Therapeutic Solutions  Adagene

Significant diversification

The 3 months correlation between Therapeutic and Adagene is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Therapeutic Solutions Internat and Adagene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adagene and Therapeutic Solutions 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 Therapeutic Solutions International are associated (or correlated) with Adagene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adagene has no effect on the direction of Therapeutic Solutions i.e., Therapeutic Solutions and Adagene go up and down completely randomly.

Pair Corralation between Therapeutic Solutions and Adagene

Given the investment horizon of 90 days Therapeutic Solutions International is expected to generate 7.74 times more return on investment than Adagene. However, Therapeutic Solutions is 7.74 times more volatile than Adagene. It trades about 0.14 of its potential returns per unit of risk. Adagene is currently generating about -0.1 per unit of risk. If you would invest  0.02  in Therapeutic Solutions International on December 30, 2024 and sell it today you would earn a total of  0.01  from holding Therapeutic Solutions International or generate 50.0% return on investment over 90 days.

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

Therapeutic Solutions Internat  vs.  Adagene

Therapeutic Solutions

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Therapeutic Solutions International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, Therapeutic Solutions demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Adagene

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Therapeutic Solutions and Adagene

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

The idea behind Therapeutic Solutions International and Adagene 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.