Correlation Between Alignment Healthcare and Olema Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both Alignment Healthcare and Olema 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 Alignment Healthcare and Olema Pharmaceuticals into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Alignment Healthcare LLC and Olema Pharmaceuticals, you can compare the effects of market volatilities on Alignment Healthcare and Olema 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 Alignment Healthcare with a short position of Olema Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alignment Healthcare and Olema Pharmaceuticals.

Diversification Opportunities for Alignment Healthcare and Olema Pharmaceuticals

0.81
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Alignment and Olema is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Alignment Healthcare LLC and Olema Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olema Pharmaceuticals and Alignment Healthcare 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 Alignment Healthcare LLC are associated (or correlated) with Olema Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olema Pharmaceuticals has no effect on the direction of Alignment Healthcare i.e., Alignment Healthcare and Olema Pharmaceuticals go up and down completely randomly.

Pair Corralation between Alignment Healthcare and Olema Pharmaceuticals

Given the investment horizon of 90 days Alignment Healthcare LLC is expected to generate 0.61 times more return on investment than Olema Pharmaceuticals. However, Alignment Healthcare LLC is 1.63 times less risky than Olema Pharmaceuticals. It trades about -0.02 of its potential returns per unit of risk. Olema Pharmaceuticals is currently generating about -0.08 per unit of risk. If you would invest  2,216  in Alignment Healthcare LLC on September 6, 2022 and sell it today you would lose (926.00)  from holding Alignment Healthcare LLC or give up 41.79% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Alignment Healthcare LLC  vs.  Olema Pharmaceuticals

 Performance (%) 
       Timeline  
Alignment Healthcare LLC 
Alignment Performance
0 of 100
Over the last 90 days Alignment Healthcare LLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's technical indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Alignment Price Channel

Olema Pharmaceuticals 
Olema Performance
0 of 100
Over the last 90 days Olema Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in January 2023. The current disturbance may also be a sign of long term up-swing for the company investors.

Olema Price Channel

Alignment Healthcare and Olema Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Alignment Healthcare and Olema Pharmaceuticals

The main advantage of trading using opposite Alignment Healthcare and Olema Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alignment Healthcare position performs unexpectedly, Olema 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 Olema Pharmaceuticals will offset losses from the drop in Olema Pharmaceuticals' long position.
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The idea behind Alignment Healthcare LLC and Olema 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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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 Fund Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.

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