Correlation Between CAVA Group, and Dianthus Therapeutics

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

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

Diversification Opportunities for CAVA Group, and Dianthus Therapeutics

0.44

Correlation Coefficient

CAVA Group,  Dianthus Therapeutics

Very weak diversification

The 3 months correlation between CAVA and Dianthus is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding CAVA Group, and Dianthus Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dianthus Therapeutics and CAVA Group, 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 CAVA Group, are associated (or correlated) with Dianthus Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dianthus Therapeutics has no effect on the direction of CAVA Group, i.e., CAVA Group, and Dianthus Therapeutics go up and down completely randomly.

Pair Corralation between CAVA Group, and Dianthus Therapeutics

Given the investment horizon of 90 days CAVA Group, is expected to generate 0.41 times more return on investment than Dianthus Therapeutics. However, CAVA Group, is 2.45 times less risky than Dianthus Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Dianthus Therapeutics is currently generating about -0.12 per unit of risk. If you would invest  11,784  in CAVA Group, on October 22, 2024 and sell it today you would earn a total of  39.00  from holding CAVA Group, or generate 0.33% return on investment over 90 days.

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

CAVA Group,  vs.  Dianthus Therapeutics

CAVA Group,

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CAVA Group, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Dianthus Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dianthus Therapeutics 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 basic indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CAVA Group, and Dianthus Therapeutics

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

The idea behind CAVA Group, and Dianthus 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.