Correlation Between Centessa Pharmaceuticals and MoonLake Immunotherapeuti

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

By analyzing existing cross correlation between Centessa Pharmaceuticals PLC and MoonLake Immunotherapeutics, you can compare the effects of market volatilities on Centessa Pharmaceuticals and MoonLake Immunotherapeuti 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 Centessa Pharmaceuticals with a short position of MoonLake Immunotherapeuti. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centessa Pharmaceuticals and MoonLake Immunotherapeuti.

Diversification Opportunities for Centessa Pharmaceuticals and MoonLake Immunotherapeuti

0.36

Correlation Coefficient

Centessa Pharmaceuticals  MoonLake Immunotherapeuti

Weak diversification

The 3 months correlation between Centessa and MoonLake is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and MoonLake Immunotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MoonLake Immunotherapeuti and Centessa Pharmaceuticals 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 Centessa Pharmaceuticals PLC are associated (or correlated) with MoonLake Immunotherapeuti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MoonLake Immunotherapeuti has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and MoonLake Immunotherapeuti go up and down completely randomly.

Pair Corralation between Centessa Pharmaceuticals and MoonLake Immunotherapeuti

Given the investment horizon of 90 days Centessa Pharmaceuticals PLC is expected to generate 1.33 times more return on investment than MoonLake Immunotherapeuti. However, Centessa Pharmaceuticals is 1.33 times more volatile than MoonLake Immunotherapeutics. It trades about -0.03 of its potential returns per unit of risk. MoonLake Immunotherapeutics is currently generating about -0.15 per unit of risk. If you would invest  1,635  in Centessa Pharmaceuticals PLC on December 30, 2024 and sell it today you would lose (176.00) from holding Centessa Pharmaceuticals PLC or give up 10.76% of portfolio value over 90 days.

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

Centessa Pharmaceuticals PLC  vs.  MoonLake Immunotherapeutics

Centessa Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centessa Pharmaceuticals PLC 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.

MoonLake Immunotherapeuti

Risk-Adjusted Performance

Very Weak

Over the last 90 days MoonLake Immunotherapeutics 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 fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Centessa Pharmaceuticals and MoonLake Immunotherapeuti

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

The idea behind Centessa Pharmaceuticals PLC and MoonLake Immunotherapeutics 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.