Correlation Between NovaBay Pharmaceuticals and Cyclacel Pharmaceuticals

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

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

Diversification Opportunities for NovaBay Pharmaceuticals and Cyclacel Pharmaceuticals

-0.13

Correlation Coefficient

NovaBay Pharmaceuticals  Cyclacel Pharmaceuticals

Good diversification

The 3 months correlation between NovaBay and Cyclacel is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NovaBay Pharmaceuticals and Cyclacel Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cyclacel Pharmaceuticals and NovaBay 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 NovaBay Pharmaceuticals are associated (or correlated) with Cyclacel Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cyclacel Pharmaceuticals has no effect on the direction of NovaBay Pharmaceuticals i.e., NovaBay Pharmaceuticals and Cyclacel Pharmaceuticals go up and down completely randomly.

Pair Corralation between NovaBay Pharmaceuticals and Cyclacel Pharmaceuticals

Considering the 90-day investment horizon NovaBay Pharmaceuticals is expected to under-perform the Cyclacel Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, NovaBay Pharmaceuticals is 1.76 times less risky than Cyclacel Pharmaceuticals. The stock trades about -0.24 of its potential returns per unit of risk. The Cyclacel Pharmaceuticals is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  36.00  in Cyclacel Pharmaceuticals on September 19, 2024 and sell it today you would earn a total of  1.00  from holding Cyclacel Pharmaceuticals or generate 2.78% return on investment over 90 days.

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

NovaBay Pharmaceuticals  vs.  Cyclacel Pharmaceuticals

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.

Cyclacel Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cyclacel Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NovaBay Pharmaceuticals and Cyclacel Pharmaceuticals

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

The idea behind NovaBay Pharmaceuticals and Cyclacel 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.