Correlation Between Cabaletta Bio and Alx Oncology

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

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

Diversification Opportunities for Cabaletta Bio and Alx Oncology

0.21

Correlation Coefficient

Cabaletta Bio  Alx Oncology

Modest diversification

The 3 months correlation between Cabaletta and Alx is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Cabaletta Bio and Alx Oncology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alx Oncology Holdings 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 Alx Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alx Oncology Holdings has no effect on the direction of Cabaletta Bio i.e., Cabaletta Bio and Alx Oncology go up and down completely randomly.

Pair Corralation between Cabaletta Bio and Alx Oncology

Given the investment horizon of 90 days Cabaletta Bio is expected to under-perform the Alx Oncology. But the stock apears to be less risky and, when comparing its historical volatility, Cabaletta Bio is 1.19 times less risky than Alx Oncology. The stock trades about -0.15 of its potential returns per unit of risk. The Alx Oncology Holdings is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  148.00  in Alx Oncology Holdings on November 28, 2024 and sell it today you would lose (43.00) from holding Alx Oncology Holdings or give up 29.05% of portfolio value over 90 days.

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

Cabaletta Bio  vs.  Alx Oncology Holdings

Cabaletta Bio

Risk-Adjusted Performance

Very Weak

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

Alx Oncology Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alx Oncology Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cabaletta Bio and Alx Oncology

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

The idea behind Cabaletta Bio and Alx Oncology Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.