Correlation Between Kala Pharmaceuticals and Axonics Modulation

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

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

Diversification Opportunities for Kala Pharmaceuticals and Axonics Modulation

-0.42

Correlation Coefficient

Kala Pharmaceuticals  Axonics Modulation

Very good diversification

The 3 months correlation between Kala and Axonics is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Kala Pharmaceuticals and Axonics Modulation Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axonics Modulation and Kala 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 Kala Pharmaceuticals are associated (or correlated) with Axonics Modulation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axonics Modulation has no effect on the direction of Kala Pharmaceuticals i.e., Kala Pharmaceuticals and Axonics Modulation go up and down completely randomly.

Pair Corralation between Kala Pharmaceuticals and Axonics Modulation

Given the investment horizon of 90 days Kala Pharmaceuticals is expected to under-perform the Axonics Modulation. In addition to that, Kala Pharmaceuticals is 12.85 times more volatile than Axonics Modulation Technologies. It trades about -0.01 of its total potential returns per unit of risk. Axonics Modulation Technologies is currently generating about 0.17 per unit of volatility. If you would invest  6,849  in Axonics Modulation Technologies on July 26, 2024 and sell it today you would earn a total of  179.00  from holding Axonics Modulation Technologies or generate 2.61% return on investment over 90 days.

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

Kala Pharmaceuticals  vs.  Axonics Modulation Technologie

Kala Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kala Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Kala Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Axonics Modulation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Axonics Modulation Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Axonics Modulation is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kala Pharmaceuticals and Axonics Modulation

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

The idea behind Kala Pharmaceuticals and Axonics Modulation Technologies 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.