Correlation Between Design Therapeutics and Conduit Pharmaceuticals

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

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

Diversification Opportunities for Design Therapeutics and Conduit Pharmaceuticals

-0.52

Correlation Coefficient

Design Therapeutics  Conduit Pharmaceuticals

Excellent diversification

The 3 months correlation between Design and Conduit is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Conduit Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Conduit Pharmaceuticals 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 Conduit Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Conduit Pharmaceuticals has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Conduit Pharmaceuticals go up and down completely randomly.

Pair Corralation between Design Therapeutics and Conduit Pharmaceuticals

Given the investment horizon of 90 days Design Therapeutics is expected to generate 3.05 times less return on investment than Conduit Pharmaceuticals. But when comparing it to its historical volatility, Design Therapeutics is 6.05 times less risky than Conduit Pharmaceuticals. It trades about 0.33 of its potential returns per unit of risk. Conduit Pharmaceuticals is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  0.80  in Conduit Pharmaceuticals on August 16, 2024 and sell it today you would earn a total of  0.20  from holding Conduit Pharmaceuticals or generate 25.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	59.09%
Values	Daily Returns

Design Therapeutics  vs.  Conduit Pharmaceuticals

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.

Conduit Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Conduit Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Conduit Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Design Therapeutics and Conduit Pharmaceuticals

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

The idea behind Design Therapeutics and Conduit 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.