Correlation Between Acasti Pharma and Capricor Therapeutics

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

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

Diversification Opportunities for Acasti Pharma and Capricor Therapeutics

0.5

Correlation Coefficient

Acasti Pharma  Capricor Therapeutics

Very weak diversification

The 3 months correlation between Acasti and Capricor is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Acasti Pharma and Capricor Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricor Therapeutics and Acasti Pharma 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 Acasti Pharma are associated (or correlated) with Capricor Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricor Therapeutics has no effect on the direction of Acasti Pharma i.e., Acasti Pharma and Capricor Therapeutics go up and down completely randomly.

Pair Corralation between Acasti Pharma and Capricor Therapeutics

Given the investment horizon of 90 days Acasti Pharma is expected to generate 3.96 times less return on investment than Capricor Therapeutics. But when comparing it to its historical volatility, Acasti Pharma is 2.26 times less risky than Capricor Therapeutics. It trades about 0.14 of its potential returns per unit of risk. Capricor Therapeutics is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  470.00  in Capricor Therapeutics on August 29, 2024 and sell it today you would earn a total of  1,436  from holding Capricor Therapeutics or generate 305.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	66.67%
Values	Daily Returns

Acasti Pharma  vs.  Capricor Therapeutics

Acasti Pharma

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Acasti Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively weak basic indicators, Acasti Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Capricor Therapeutics

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capricor Therapeutics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Capricor Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Acasti Pharma and Capricor Therapeutics

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

The idea behind Acasti Pharma and Capricor 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.