Correlation Between Assembly Biosciences and Century Therapeutics

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

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

Diversification Opportunities for Assembly Biosciences and Century Therapeutics

0.26

Correlation Coefficient

Assembly Biosciences  Century Therapeutics

Modest diversification

The 3 months correlation between Assembly and Century is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Assembly Biosciences and Century Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Therapeutics and Assembly Biosciences 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 Assembly Biosciences are associated (or correlated) with Century Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Therapeutics has no effect on the direction of Assembly Biosciences i.e., Assembly Biosciences and Century Therapeutics go up and down completely randomly.

Pair Corralation between Assembly Biosciences and Century Therapeutics

Given the investment horizon of 90 days Assembly Biosciences is expected to generate 0.83 times more return on investment than Century Therapeutics. However, Assembly Biosciences is 1.2 times less risky than Century Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Century Therapeutics is currently generating about 0.04 per unit of risk. If you would invest  1,583  in Assembly Biosciences on September 1, 2024 and sell it today you would earn a total of  121.00  from holding Assembly Biosciences or generate 7.64% return on investment over 90 days.

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

Assembly Biosciences  vs.  Century Therapeutics

Assembly Biosciences

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Assembly Biosciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating primary indicators, Assembly Biosciences sustained solid returns over the last few months and may actually be approaching a breakup point.

Century Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Century Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Assembly Biosciences and Century Therapeutics

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

The idea behind Assembly Biosciences and Century 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 Transaction History module to view history of all your transactions and understand their impact on performance.