Correlation Between SIVERS SEMICONDUCTORS and Cara Therapeutics

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

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

Diversification Opportunities for SIVERS SEMICONDUCTORS and Cara Therapeutics

0.45

Correlation Coefficient

SIVERS SEMICONDUCTORS  Cara Therapeutics

Very weak diversification

The 3 months correlation between SIVERS and Cara is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding SIVERS SEMICONDUCTORS AB and Cara Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cara Therapeutics and SIVERS SEMICONDUCTORS 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 SIVERS SEMICONDUCTORS AB are associated (or correlated) with Cara Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cara Therapeutics has no effect on the direction of SIVERS SEMICONDUCTORS i.e., SIVERS SEMICONDUCTORS and Cara Therapeutics go up and down completely randomly.

Pair Corralation between SIVERS SEMICONDUCTORS and Cara Therapeutics

Assuming the 90 days horizon SIVERS SEMICONDUCTORS is expected to generate 2.3 times less return on investment than Cara Therapeutics. But when comparing it to its historical volatility, SIVERS SEMICONDUCTORS AB is 1.12 times less risky than Cara Therapeutics. It trades about 0.11 of its potential returns per unit of risk. Cara Therapeutics is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  228.00  in Cara Therapeutics on December 19, 2024 and sell it today you would earn a total of  256.00  from holding Cara Therapeutics or generate 112.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	81.36%
Values	Daily Returns

SIVERS SEMICONDUCTORS AB  vs.  Cara Therapeutics

SIVERS SEMICONDUCTORS

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in SIVERS SEMICONDUCTORS AB are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, SIVERS SEMICONDUCTORS reported solid returns over the last few months and may actually be approaching a breakup point.

Cara Therapeutics

Risk-Adjusted Performance

Solid

Over the last 90 days Cara Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly uncertain basic indicators, Cara Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SIVERS SEMICONDUCTORS and Cara Therapeutics

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

The idea behind SIVERS SEMICONDUCTORS AB and Cara 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..