Correlation Between Unicycive Therapeutics and Xenon Pharmaceuticals

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

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

Diversification Opportunities for Unicycive Therapeutics and Xenon Pharmaceuticals

0.27

Correlation Coefficient

Unicycive Therapeutics  Xenon Pharmaceuticals

Modest diversification

The 3 months correlation between Unicycive and Xenon is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Unicycive Therapeutics and Xenon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Xenon Pharmaceuticals and Unicycive Therapeutics 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 Unicycive Therapeutics are associated (or correlated) with Xenon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Xenon Pharmaceuticals has no effect on the direction of Unicycive Therapeutics i.e., Unicycive Therapeutics and Xenon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Unicycive Therapeutics and Xenon Pharmaceuticals

Given the investment horizon of 90 days Unicycive Therapeutics is expected to under-perform the Xenon Pharmaceuticals. In addition to that, Unicycive Therapeutics is 2.28 times more volatile than Xenon Pharmaceuticals. It trades about -0.07 of its total potential returns per unit of risk. Xenon Pharmaceuticals is currently generating about -0.08 per unit of volatility. If you would invest  3,853  in Xenon Pharmaceuticals on December 29, 2024 and sell it today you would lose (407.00) from holding Xenon Pharmaceuticals or give up 10.56% of portfolio value over 90 days.

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

Unicycive Therapeutics  vs.  Xenon Pharmaceuticals

Unicycive Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Unicycive Therapeutics 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 fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Xenon Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Xenon Pharmaceuticals 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 sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Unicycive Therapeutics and Xenon Pharmaceuticals

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

The idea behind Unicycive Therapeutics and Xenon 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.

Check out your portfolio center.

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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.