Correlation Between Cabaletta Bio and ACADIA Pharmaceuticals

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

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

Diversification Opportunities for Cabaletta Bio and ACADIA Pharmaceuticals

-0.43

Correlation Coefficient

Cabaletta Bio  ACADIA Pharmaceuticals

Very good diversification

The 3 months correlation between Cabaletta and ACADIA is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Cabaletta Bio and ACADIA Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ACADIA Pharmaceuticals and Cabaletta Bio 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 Cabaletta Bio are associated (or correlated) with ACADIA Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ACADIA Pharmaceuticals has no effect on the direction of Cabaletta Bio i.e., Cabaletta Bio and ACADIA Pharmaceuticals go up and down completely randomly.

Pair Corralation between Cabaletta Bio and ACADIA Pharmaceuticals

Given the investment horizon of 90 days Cabaletta Bio is expected to generate 3.91 times more return on investment than ACADIA Pharmaceuticals. However, Cabaletta Bio is 3.91 times more volatile than ACADIA Pharmaceuticals. It trades about 0.15 of its potential returns per unit of risk. ACADIA Pharmaceuticals is currently generating about 0.06 per unit of risk. If you would invest  187.00  in Cabaletta Bio on September 23, 2024 and sell it today you would earn a total of  51.00  from holding Cabaletta Bio or generate 27.27% return on investment over 90 days.

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

Cabaletta Bio  vs.  ACADIA Pharmaceuticals

Cabaletta Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabaletta Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

ACADIA Pharmaceuticals

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ACADIA Pharmaceuticals are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, ACADIA Pharmaceuticals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cabaletta Bio and ACADIA Pharmaceuticals

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

The idea behind Cabaletta Bio and ACADIA 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.