Correlation Between Adagene and Catalyst Pharmaceuticals

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

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

Diversification Opportunities for Adagene and Catalyst Pharmaceuticals

0.09

Correlation Coefficient

Adagene  Catalyst Pharmaceuticals

Significant diversification

The 3 months correlation between Adagene and Catalyst is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Adagene and Catalyst Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst Pharmaceuticals and Adagene 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 Adagene are associated (or correlated) with Catalyst Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Pharmaceuticals has no effect on the direction of Adagene i.e., Adagene and Catalyst Pharmaceuticals go up and down completely randomly.

Pair Corralation between Adagene and Catalyst Pharmaceuticals

Given the investment horizon of 90 days Adagene is expected to generate 3.57 times more return on investment than Catalyst Pharmaceuticals. However, Adagene is 3.57 times more volatile than Catalyst Pharmaceuticals. It trades about 0.17 of its potential returns per unit of risk. Catalyst Pharmaceuticals is currently generating about -0.3 per unit of risk. If you would invest  253.00  in Adagene on March 28, 2024 and sell it today you would earn a total of  47.00  from holding Adagene or generate 18.58% return on investment over 90 days.

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

Adagene  vs.  Catalyst Pharmaceuticals

Adagene

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Adagene are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Adagene may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Catalyst Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Adagene and Catalyst Pharmaceuticals

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

The idea behind Adagene and Catalyst 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.

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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.