Correlation Between Cardio Diagnostics and Spero Therapeutics

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

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

Diversification Opportunities for Cardio Diagnostics and Spero Therapeutics

0.84

Correlation Coefficient

Cardio Diagnostics  Spero Therapeutics

Very poor diversification

The 3 months correlation between Cardio and Spero is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Cardio Diagnostics Holdings and Spero Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spero Therapeutics and Cardio Diagnostics 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 Cardio Diagnostics Holdings are associated (or correlated) with Spero Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spero Therapeutics has no effect on the direction of Cardio Diagnostics i.e., Cardio Diagnostics and Spero Therapeutics go up and down completely randomly.

Pair Corralation between Cardio Diagnostics and Spero Therapeutics

Given the investment horizon of 90 days Cardio Diagnostics Holdings is expected to under-perform the Spero Therapeutics. In addition to that, Cardio Diagnostics is 2.18 times more volatile than Spero Therapeutics. It trades about -0.12 of its total potential returns per unit of risk. Spero Therapeutics is currently generating about -0.04 per unit of volatility. If you would invest  94.00  in Spero Therapeutics on December 25, 2024 and sell it today you would lose (12.00) from holding Spero Therapeutics or give up 12.77% of portfolio value over 90 days.

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

Cardio Diagnostics Holdings  vs.  Spero Therapeutics

Cardio Diagnostics

Risk-Adjusted Performance

Very Weak

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

Spero Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Spero Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cardio Diagnostics and Spero Therapeutics

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

The idea behind Cardio Diagnostics Holdings and Spero 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.