Correlation Between Exagen and Edgewise Therapeutics

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

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

Diversification Opportunities for Exagen and Edgewise Therapeutics

-0.42

Correlation Coefficient

Exagen  Edgewise Therapeutics

Very good diversification

The 3 months correlation between Exagen and Edgewise is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Exagen Inc and Edgewise Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewise Therapeutics and Exagen 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 Exagen Inc are associated (or correlated) with Edgewise Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewise Therapeutics has no effect on the direction of Exagen i.e., Exagen and Edgewise Therapeutics go up and down completely randomly.

Pair Corralation between Exagen and Edgewise Therapeutics

Considering the 90-day investment horizon Exagen is expected to generate 1.56 times less return on investment than Edgewise Therapeutics. But when comparing it to its historical volatility, Exagen Inc is 1.04 times less risky than Edgewise Therapeutics. It trades about 0.06 of its potential returns per unit of risk. Edgewise Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,105  in Edgewise Therapeutics on October 5, 2024 and sell it today you would earn a total of  1,598  from holding Edgewise Therapeutics or generate 144.62% return on investment over 90 days.

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

Exagen Inc  vs.  Edgewise Therapeutics

Exagen Inc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exagen Inc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Exagen displayed solid returns over the last few months and may actually be approaching a breakup point.

Edgewise Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewise Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Edgewise Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exagen and Edgewise Therapeutics

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

The idea behind Exagen Inc and Edgewise 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.