Correlation Between C4 Therapeutics and MorphoSys

Can any of the company-specific risk be diversified away by investing in both C4 Therapeutics and MorphoSys 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 C4 Therapeutics and MorphoSys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between C4 Therapeutics and MorphoSys AG ADR, you can compare the effects of market volatilities on C4 Therapeutics and MorphoSys 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 C4 Therapeutics with a short position of MorphoSys. Check out your portfolio center. Please also check ongoing floating volatility patterns of C4 Therapeutics and MorphoSys.

Diversification Opportunities for C4 Therapeutics and MorphoSys

0.3

Correlation Coefficient

C4 Therapeutics  MorphoSys

Weak diversification

The 3 months correlation between CCCC and MorphoSys is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding C4 Therapeutics and MorphoSys AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MorphoSys AG ADR and C4 Therapeutics 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 C4 Therapeutics are associated (or correlated) with MorphoSys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MorphoSys AG ADR has no effect on the direction of C4 Therapeutics i.e., C4 Therapeutics and MorphoSys go up and down completely randomly.

Pair Corralation between C4 Therapeutics and MorphoSys

Given the investment horizon of 90 days C4 Therapeutics is expected to generate 0.29 times more return on investment than MorphoSys. However, C4 Therapeutics is 3.41 times less risky than MorphoSys. It trades about -0.01 of its potential returns per unit of risk. MorphoSys AG ADR is currently generating about -0.18 per unit of risk. If you would invest  485.00  in C4 Therapeutics on September 29, 2024 and sell it today you would lose (106.00) from holding C4 Therapeutics or give up 21.86% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	22.22%
Values	Daily Returns

C4 Therapeutics  vs.  MorphoSys AG ADR

C4 Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days C4 Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

MorphoSys AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MorphoSys AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MorphoSys is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with C4 Therapeutics and MorphoSys

The main advantage of trading using opposite C4 Therapeutics and MorphoSys positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if C4 Therapeutics position performs unexpectedly, MorphoSys 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 MorphoSys will offset losses from the drop in MorphoSys' long position.

The idea behind C4 Therapeutics and MorphoSys AG ADR 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.