Correlation Between DexCom and Emmaus Life

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Can any of the company-specific risk be diversified away by investing in both DexCom and Emmaus Life 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 DexCom and Emmaus Life into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DexCom Inc and Emmaus Life Sciences, you can compare the effects of market volatilities on DexCom and Emmaus Life 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 DexCom with a short position of Emmaus Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of DexCom and Emmaus Life.

Diversification Opportunities for DexCom and Emmaus Life

-0.35
  Correlation Coefficient

Very good diversification

The 3 months correlation between DexCom and Emmaus is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding DexCom Inc and Emmaus Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emmaus Life Sciences and DexCom 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 DexCom Inc are associated (or correlated) with Emmaus Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emmaus Life Sciences has no effect on the direction of DexCom i.e., DexCom and Emmaus Life go up and down completely randomly.

Pair Corralation between DexCom and Emmaus Life

Given the investment horizon of 90 days DexCom is expected to generate 2.98 times less return on investment than Emmaus Life. But when comparing it to its historical volatility, DexCom Inc is 3.92 times less risky than Emmaus Life. It trades about 0.02 of its potential returns per unit of risk. Emmaus Life Sciences is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  75.00  in Emmaus Life Sciences on December 30, 2023 and sell it today you would lose (62.00) from holding Emmaus Life Sciences or give up 82.67% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy89.27%
ValuesDaily Returns

DexCom Inc  vs.  Emmaus Life Sciences

 Performance 
       Timeline  
DexCom Inc 

Risk-Adjusted Performance

7 of 100

 
Low
 
High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in DexCom Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting fundamental indicators, DexCom displayed solid returns over the last few months and may actually be approaching a breakup point.
Emmaus Life Sciences 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Solid
Over the last 90 days Emmaus Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat uncertain primary indicators, Emmaus Life sustained solid returns over the last few months and may actually be approaching a breakup point.

DexCom and Emmaus Life Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with DexCom and Emmaus Life

The main advantage of trading using opposite DexCom and Emmaus Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DexCom position performs unexpectedly, Emmaus Life 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 Emmaus Life will offset losses from the drop in Emmaus Life's long position.
The idea behind DexCom Inc and Emmaus Life Sciences 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 CEOs Directory module to screen CEOs from public companies around the world.

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