Correlation Between BridgeBio Pharma and Cardiff Oncology

Can any of the company-specific risk be diversified away by investing in both BridgeBio Pharma and Cardiff Oncology 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 BridgeBio Pharma and Cardiff Oncology into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for BridgeBio Pharma and Cardiff Oncology

-0.3

Correlation Coefficient

BridgeBio Pharma  Cardiff Oncology

Very good diversification

The 3 months correlation between BridgeBio and Cardiff is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding BridgeBio Pharma and Cardiff Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cardiff Oncology and BridgeBio Pharma 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 BridgeBio Pharma are associated (or correlated) with Cardiff Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cardiff Oncology has no effect on the direction of BridgeBio Pharma i.e., BridgeBio Pharma and Cardiff Oncology go up and down completely randomly.

Pair Corralation between BridgeBio Pharma and Cardiff Oncology

Given the investment horizon of 90 days BridgeBio Pharma is expected to generate 7.65 times less return on investment than Cardiff Oncology. But when comparing it to its historical volatility, BridgeBio Pharma is 2.47 times less risky than Cardiff Oncology. It trades about 0.04 of its potential returns per unit of risk. Cardiff Oncology is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  231.00  in Cardiff Oncology on September 11, 2024 and sell it today you would earn a total of  147.00  from holding Cardiff Oncology or generate 63.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

BridgeBio Pharma  vs.  Cardiff Oncology

BridgeBio Pharma

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BridgeBio Pharma are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, BridgeBio Pharma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cardiff Oncology

Risk-Adjusted Performance

9 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cardiff Oncology are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Cardiff Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with BridgeBio Pharma and Cardiff Oncology

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

The idea behind BridgeBio Pharma and Cardiff Oncology 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.