Correlation Between ADC Therapeutics and Alector

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

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

Diversification Opportunities for ADC Therapeutics and Alector

0.82

Correlation Coefficient

ADC Therapeutics  Alector

Very poor diversification

The 3 months correlation between ADC and Alector is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding ADC Therapeutics SA and Alector in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alector and ADC 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 ADC Therapeutics SA are associated (or correlated) with Alector. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alector has no effect on the direction of ADC Therapeutics i.e., ADC Therapeutics and Alector go up and down completely randomly.

Pair Corralation between ADC Therapeutics and Alector

Given the investment horizon of 90 days ADC Therapeutics SA is expected to under-perform the Alector. But the stock apears to be less risky and, when comparing its historical volatility, ADC Therapeutics SA is 1.13 times less risky than Alector. The stock trades about -0.06 of its potential returns per unit of risk. The Alector is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  152.00  in Alector on May 9, 2025 and sell it today you would lose (6.50) from holding Alector or give up 4.28% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

ADC Therapeutics SA  vs.  Alector

ADC Therapeutics

Risk-Adjusted Performance

Good

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

Alector

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Alector are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Alector exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ADC Therapeutics and Alector

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

The idea behind ADC Therapeutics SA and Alector 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.