Correlation Between ADC Therapeutics and Design Therapeutics

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

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

Diversification Opportunities for ADC Therapeutics and Design Therapeutics

0.09

Correlation Coefficient

ADC Therapeutics  Design Therapeutics

Significant diversification

The 3 months correlation between ADC and Design is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding ADC Therapeutics SA and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics and ADC 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 ADC Therapeutics SA are associated (or correlated) with Design Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design Therapeutics has no effect on the direction of ADC Therapeutics i.e., ADC Therapeutics and Design Therapeutics go up and down completely randomly.

Pair Corralation between ADC Therapeutics and Design Therapeutics

Given the investment horizon of 90 days ADC Therapeutics SA is expected to generate 1.65 times more return on investment than Design Therapeutics. However, ADC Therapeutics is 1.65 times more volatile than Design Therapeutics. It trades about 0.18 of its potential returns per unit of risk. Design Therapeutics is currently generating about -0.03 per unit of risk. If you would invest  143.00  in ADC Therapeutics SA on May 1, 2025 and sell it today you would earn a total of  151.00  from holding ADC Therapeutics SA or generate 105.59% return on investment over 90 days.

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

ADC Therapeutics SA  vs.  Design Therapeutics

ADC Therapeutics

Risk-Adjusted Performance

Good

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

Design Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Design Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ADC Therapeutics and Design Therapeutics

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

The idea behind ADC Therapeutics SA and Design Therapeutics 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.