Correlation Between Wesana Health and Algernon Pharmaceuticals

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

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

Diversification Opportunities for Wesana Health and Algernon Pharmaceuticals

-0.05

Correlation Coefficient

Wesana Health  Algernon Pharmaceuticals

Good diversification

The 3 months correlation between Wesana and Algernon is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Wesana Health Holdings and Algernon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algernon Pharmaceuticals and Wesana Health 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 Wesana Health Holdings are associated (or correlated) with Algernon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algernon Pharmaceuticals has no effect on the direction of Wesana Health i.e., Wesana Health and Algernon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Wesana Health and Algernon Pharmaceuticals

Assuming the 90 days horizon Wesana Health Holdings is expected to generate 16.57 times more return on investment than Algernon Pharmaceuticals. However, Wesana Health is 16.57 times more volatile than Algernon Pharmaceuticals. It trades about 0.25 of its potential returns per unit of risk. Algernon Pharmaceuticals is currently generating about 0.03 per unit of risk. If you would invest  0.62  in Wesana Health Holdings on October 26, 2024 and sell it today you would earn a total of  3.38  from holding Wesana Health Holdings or generate 545.16% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Wesana Health Holdings  vs.  Algernon Pharmaceuticals

Wesana Health Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wesana Health Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Wesana Health reported solid returns over the last few months and may actually be approaching a breakup point.

Algernon Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Algernon Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Algernon Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Wesana Health and Algernon Pharmaceuticals

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

The idea behind Wesana Health Holdings and Algernon 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.