Correlation Between HCW Biologics and Relay Therapeutics

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

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

Diversification Opportunities for HCW Biologics and Relay Therapeutics

0.41

Correlation Coefficient

HCW Biologics  Relay Therapeutics

Very weak diversification

The 3 months correlation between HCW and Relay is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics and Relay Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relay Therapeutics and HCW Biologics 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 HCW Biologics are associated (or correlated) with Relay Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relay Therapeutics has no effect on the direction of HCW Biologics i.e., HCW Biologics and Relay Therapeutics go up and down completely randomly.

Pair Corralation between HCW Biologics and Relay Therapeutics

Given the investment horizon of 90 days HCW Biologics is expected to under-perform the Relay Therapeutics. In addition to that, HCW Biologics is 1.9 times more volatile than Relay Therapeutics. It trades about -0.31 of its total potential returns per unit of risk. Relay Therapeutics is currently generating about -0.14 per unit of volatility. If you would invest  675.00  in Relay Therapeutics on August 13, 2024 and sell it today you would lose (55.00) from holding Relay Therapeutics or give up 8.15% of portfolio value over 90 days.

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

HCW Biologics  vs.  Relay Therapeutics

HCW Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCW Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Relay Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Relay Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Relay Therapeutics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with HCW Biologics and Relay Therapeutics

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

The idea behind HCW Biologics and Relay 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.