Correlation Between Durect and Emergent Biosolutions

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

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

Diversification Opportunities for Durect and Emergent Biosolutions

0.76

Correlation Coefficient

Durect  Emergent Biosolutions

Poor diversification

The 3 months correlation between Durect and Emergent is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Durect and Emergent Biosolutions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Emergent Biosolutions and Durect 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 Durect are associated (or correlated) with Emergent Biosolutions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Emergent Biosolutions has no effect on the direction of Durect i.e., Durect and Emergent Biosolutions go up and down completely randomly.

Pair Corralation between Durect and Emergent Biosolutions

Given the investment horizon of 90 days Durect is expected to generate 0.95 times more return on investment than Emergent Biosolutions. However, Durect is 1.05 times less risky than Emergent Biosolutions. It trades about 0.01 of its potential returns per unit of risk. Emergent Biosolutions is currently generating about -0.01 per unit of risk. If you would invest  465.00  in Durect on March 28, 2024 and sell it today you would lose (324.00) from holding Durect or give up 69.68% of portfolio value over 90 days.

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

Durect  vs.  Emergent Biosolutions

Durect

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Durect are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Durect showed solid returns over the last few months and may actually be approaching a breakup point.

Emergent Biosolutions

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Emergent Biosolutions are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental drivers, Emergent Biosolutions unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Durect and Emergent Biosolutions

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

The idea behind Durect and Emergent Biosolutions 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.