Correlation Between Cns Pharmaceuticals and NovaBay Pharmaceuticals

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

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

Diversification Opportunities for Cns Pharmaceuticals and NovaBay Pharmaceuticals

-0.17

Correlation Coefficient

Cns Pharmaceuticals  NovaBay Pharmaceuticals

Good diversification

The 3 months correlation between Cns and NovaBay is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Cns Pharmaceuticals and NovaBay Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NovaBay Pharmaceuticals and Cns Pharmaceuticals 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 Cns Pharmaceuticals are associated (or correlated) with NovaBay Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NovaBay Pharmaceuticals has no effect on the direction of Cns Pharmaceuticals i.e., Cns Pharmaceuticals and NovaBay Pharmaceuticals go up and down completely randomly.

Pair Corralation between Cns Pharmaceuticals and NovaBay Pharmaceuticals

Given the investment horizon of 90 days Cns Pharmaceuticals is expected to generate 1.71 times more return on investment than NovaBay Pharmaceuticals. However, Cns Pharmaceuticals is 1.71 times more volatile than NovaBay Pharmaceuticals. It trades about -0.04 of its potential returns per unit of risk. NovaBay Pharmaceuticals is currently generating about -0.29 per unit of risk. If you would invest  12.00  in Cns Pharmaceuticals on September 19, 2024 and sell it today you would lose (1.08) from holding Cns Pharmaceuticals or give up 9.0% of portfolio value over 90 days.

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

Cns Pharmaceuticals  vs.  NovaBay Pharmaceuticals

Cns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cns Pharmaceuticals 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 January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

NovaBay Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NovaBay Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, NovaBay Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cns Pharmaceuticals and NovaBay Pharmaceuticals

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

The idea behind Cns Pharmaceuticals and NovaBay 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 Global Correlations module to find global opportunities by holding instruments from different markets.