Correlation Between Entera Bio and Processa Pharmaceuticals

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

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

Diversification Opportunities for Entera Bio and Processa Pharmaceuticals

0.35

Correlation Coefficient

Entera Bio  Processa Pharmaceuticals

Weak diversification

The 3 months correlation between Entera and Processa is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Entera Bio and Processa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Processa Pharmaceuticals and Entera Bio 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 Entera Bio are associated (or correlated) with Processa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Processa Pharmaceuticals has no effect on the direction of Entera Bio i.e., Entera Bio and Processa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Entera Bio and Processa Pharmaceuticals

Given the investment horizon of 90 days Entera Bio is expected to generate 11.82 times less return on investment than Processa Pharmaceuticals. But when comparing it to its historical volatility, Entera Bio is 2.25 times less risky than Processa Pharmaceuticals. It trades about 0.01 of its potential returns per unit of risk. Processa Pharmaceuticals is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  23.00  in Processa Pharmaceuticals on May 16, 2025 and sell it today you would lose (0.76) from holding Processa Pharmaceuticals or give up 3.3% of portfolio value over 90 days.

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

Entera Bio  vs.  Processa Pharmaceuticals

Entera Bio

Risk-Adjusted Performance

Weakest

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

Processa Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Processa Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Processa Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Entera Bio and Processa Pharmaceuticals

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

The idea behind Entera Bio and Processa 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.