Correlation Between PetIQ and Hepion Pharmaceuticals

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

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

Diversification Opportunities for PetIQ and Hepion Pharmaceuticals

-0.66

Correlation Coefficient

PetIQ  Hepion Pharmaceuticals

Excellent diversification

The 3 months correlation between PetIQ and Hepion is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding PetIQ Inc and Hepion Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hepion Pharmaceuticals and PetIQ 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 PetIQ Inc are associated (or correlated) with Hepion Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hepion Pharmaceuticals has no effect on the direction of PetIQ i.e., PetIQ and Hepion Pharmaceuticals go up and down completely randomly.

Pair Corralation between PetIQ and Hepion Pharmaceuticals

Given the investment horizon of 90 days PetIQ Inc is expected to generate 0.03 times more return on investment than Hepion Pharmaceuticals. However, PetIQ Inc is 37.04 times less risky than Hepion Pharmaceuticals. It trades about 0.37 of its potential returns per unit of risk. Hepion Pharmaceuticals is currently generating about -0.1 per unit of risk. If you would invest  3,050  in PetIQ Inc on June 26, 2024 and sell it today you would earn a total of  29.00  from holding PetIQ Inc or generate 0.95% return on investment over 90 days.

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

PetIQ Inc  vs.  Hepion Pharmaceuticals

PetIQ Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in PetIQ Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, PetIQ reported solid returns over the last few months and may actually be approaching a breakup point.

Hepion Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hepion Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in October 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with PetIQ and Hepion Pharmaceuticals

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

The idea behind PetIQ Inc and Hepion 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.