Correlation Between Design Therapeutics and Koninklijke Philips

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

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

Diversification Opportunities for Design Therapeutics and Koninklijke Philips

0.15

Correlation Coefficient

Design Therapeutics  Koninklijke Philips

Average diversification

The 3 months correlation between Design and Koninklijke is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Koninklijke Philips NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Koninklijke Philips and Design Therapeutics 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 Design Therapeutics are associated (or correlated) with Koninklijke Philips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Koninklijke Philips has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Koninklijke Philips go up and down completely randomly.

Pair Corralation between Design Therapeutics and Koninklijke Philips

Given the investment horizon of 90 days Design Therapeutics is expected to under-perform the Koninklijke Philips. But the stock apears to be less risky and, when comparing its historical volatility, Design Therapeutics is 1.83 times less risky than Koninklijke Philips. The stock trades about 0.0 of its potential returns per unit of risk. The Koninklijke Philips NV is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,008  in Koninklijke Philips NV on February 5, 2024 and sell it today you would earn a total of  674.00  from holding Koninklijke Philips NV or generate 33.57% return on investment over 90 days.

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

Design Therapeutics  vs.  Koninklijke Philips NV

Design Therapeutics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Koninklijke Philips

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Koninklijke Philips NV are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady technical indicators, Koninklijke Philips reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Design Therapeutics and Koninklijke Philips

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

The idea behind Design Therapeutics and Koninklijke Philips NV 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.