Correlation Between Climb Bio and Papaya Growth

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

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

Diversification Opportunities for Climb Bio and Papaya Growth

-0.03

Correlation Coefficient

Climb Bio  Papaya Growth

Good diversification

The 3 months correlation between Climb and Papaya is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Climb Bio and Papaya Growth Opportunity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Papaya Growth Opportunity and Climb 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 Climb Bio are associated (or correlated) with Papaya Growth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Papaya Growth Opportunity has no effect on the direction of Climb Bio i.e., Climb Bio and Papaya Growth go up and down completely randomly.

Pair Corralation between Climb Bio and Papaya Growth

Given the investment horizon of 90 days Climb Bio is expected to under-perform the Papaya Growth. In addition to that, Climb Bio is 5.35 times more volatile than Papaya Growth Opportunity. It trades about -0.14 of its total potential returns per unit of risk. Papaya Growth Opportunity is currently generating about -0.03 per unit of volatility. If you would invest  1,175  in Papaya Growth Opportunity on October 4, 2024 and sell it today you would lose (56.00) from holding Papaya Growth Opportunity or give up 4.77% of portfolio value over 90 days.

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

Climb Bio  vs.  Papaya Growth Opportunity

Climb Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Climb Bio 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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Papaya Growth Opportunity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Papaya Growth Opportunity has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Papaya Growth is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Climb Bio and Papaya Growth

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

The idea behind Climb Bio and Papaya Growth Opportunity 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.