Correlation Between Sonoma Pharmaceuticals and Durect

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

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

Diversification Opportunities for Sonoma Pharmaceuticals and Durect

-0.27

Correlation Coefficient

Sonoma Pharmaceuticals  Durect

Very good diversification

The 3 months correlation between Sonoma and Durect is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Sonoma Pharmaceuticals and Durect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Durect and Sonoma 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 Sonoma Pharmaceuticals are associated (or correlated) with Durect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Durect has no effect on the direction of Sonoma Pharmaceuticals i.e., Sonoma Pharmaceuticals and Durect go up and down completely randomly.

Pair Corralation between Sonoma Pharmaceuticals and Durect

Given the investment horizon of 90 days Sonoma Pharmaceuticals is expected to generate 38.79 times less return on investment than Durect. But when comparing it to its historical volatility, Sonoma Pharmaceuticals is 7.47 times less risky than Durect. It trades about 0.02 of its potential returns per unit of risk. Durect is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Durect on May 7, 2025 and sell it today you would earn a total of  128.00  from holding Durect or generate 220.69% return on investment over 90 days.

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

Sonoma Pharmaceuticals  vs.  Durect

Sonoma Pharmaceuticals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonoma Pharmaceuticals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Sonoma Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Durect

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Durect are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Durect showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sonoma Pharmaceuticals and Durect

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

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