Correlation Between Adaptimmune Therapeutics and Terns Pharmaceuticals

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

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

Diversification Opportunities for Adaptimmune Therapeutics and Terns Pharmaceuticals

0.66

Correlation Coefficient

Adaptimmune Therapeutics  Terns Pharmaceuticals

Poor diversification

The 3 months correlation between Adaptimmune and Terns is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Adaptimmune Therapeutics Plc and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals and Adaptimmune 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 Adaptimmune Therapeutics Plc are associated (or correlated) with Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Adaptimmune Therapeutics i.e., Adaptimmune Therapeutics and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between Adaptimmune Therapeutics and Terns Pharmaceuticals

Given the investment horizon of 90 days Adaptimmune Therapeutics Plc is expected to under-perform the Terns Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Adaptimmune Therapeutics Plc is 1.1 times less risky than Terns Pharmaceuticals. The stock trades about -0.15 of its potential returns per unit of risk. The Terns Pharmaceuticals is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  723.00  in Terns Pharmaceuticals on August 31, 2024 and sell it today you would lose (89.00) from holding Terns Pharmaceuticals or give up 12.31% of portfolio value over 90 days.

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

Adaptimmune Therapeutics Plc  vs.  Terns Pharmaceuticals

Adaptimmune Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Adaptimmune Therapeutics Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Terns Pharmaceuticals is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Adaptimmune Therapeutics and Terns Pharmaceuticals

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

The idea behind Adaptimmune Therapeutics Plc and Terns 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.