Correlation Between Effector Therapeutics and Cidara Therapeutics

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

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

Diversification Opportunities for Effector Therapeutics and Cidara Therapeutics

0.23

Correlation Coefficient

Effector Therapeutics  Cidara Therapeutics

Modest diversification

The 3 months correlation between Effector and Cidara is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Effector Therapeutics and Cidara Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cidara Therapeutics and Effector 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 Effector Therapeutics are associated (or correlated) with Cidara Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cidara Therapeutics has no effect on the direction of Effector Therapeutics i.e., Effector Therapeutics and Cidara Therapeutics go up and down completely randomly.

Pair Corralation between Effector Therapeutics and Cidara Therapeutics

Given the investment horizon of 90 days Effector Therapeutics is expected to generate 1.84 times less return on investment than Cidara Therapeutics. But when comparing it to its historical volatility, Effector Therapeutics is 1.38 times less risky than Cidara Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Cidara Therapeutics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,028  in Cidara Therapeutics on February 21, 2024 and sell it today you would earn a total of  98.00  from holding Cidara Therapeutics or generate 9.53% return on investment over 90 days.

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

Effector Therapeutics  vs.  Cidara Therapeutics

Effector Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Effector Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Cidara Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Effector Therapeutics and Cidara Therapeutics

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

The idea behind Effector Therapeutics and Cidara 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.