Correlation Between Benitec Biopharma and Capricor Therapeutics

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

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

Diversification Opportunities for Benitec Biopharma and Capricor Therapeutics

0.83

Correlation Coefficient

Benitec Biopharma  Capricor Therapeutics

Very poor diversification

The 3 months correlation between Benitec and Capricor is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Benitec Biopharma Ltd and Capricor Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricor Therapeutics and Benitec Biopharma 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 Benitec Biopharma Ltd are associated (or correlated) with Capricor Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricor Therapeutics has no effect on the direction of Benitec Biopharma i.e., Benitec Biopharma and Capricor Therapeutics go up and down completely randomly.

Pair Corralation between Benitec Biopharma and Capricor Therapeutics

Given the investment horizon of 90 days Benitec Biopharma is expected to generate 9.86 times less return on investment than Capricor Therapeutics. But when comparing it to its historical volatility, Benitec Biopharma Ltd is 2.39 times less risky than Capricor Therapeutics. It trades about 0.06 of its potential returns per unit of risk. Capricor Therapeutics is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  435.00  in Capricor Therapeutics on September 4, 2024 and sell it today you would earn a total of  1,529  from holding Capricor Therapeutics or generate 351.49% return on investment over 90 days.

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

Benitec Biopharma Ltd  vs.  Capricor Therapeutics

Benitec Biopharma

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Benitec Biopharma Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Benitec Biopharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Capricor Therapeutics

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capricor Therapeutics are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Capricor Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Benitec Biopharma and Capricor Therapeutics

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

The idea behind Benitec Biopharma Ltd and Capricor 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.