Correlation Between Centessa Pharmaceuticals and Ocular Therapeutix

Can any of the company-specific risk be diversified away by investing in both Centessa Pharmaceuticals and Ocular Therapeutix 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 Ocular Therapeutix 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 Ocular Therapeutix, you can compare the effects of market volatilities on Centessa Pharmaceuticals and Ocular Therapeutix 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 Ocular Therapeutix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centessa Pharmaceuticals and Ocular Therapeutix.

Diversification Opportunities for Centessa Pharmaceuticals and Ocular Therapeutix

-0.04

Correlation Coefficient

Centessa Pharmaceuticals  Ocular Therapeutix

Good diversification

The 3 months correlation between Centessa and Ocular is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and Ocular Therapeutix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ocular Therapeutix 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 Ocular Therapeutix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ocular Therapeutix has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and Ocular Therapeutix go up and down completely randomly.

Pair Corralation between Centessa Pharmaceuticals and Ocular Therapeutix

Given the investment horizon of 90 days Centessa Pharmaceuticals PLC is expected to generate 1.04 times more return on investment than Ocular Therapeutix. However, Centessa Pharmaceuticals is 1.04 times more volatile than Ocular Therapeutix. It trades about 0.07 of its potential returns per unit of risk. Ocular Therapeutix is currently generating about 0.05 per unit of risk. If you would invest  1,510  in Centessa Pharmaceuticals PLC on September 12, 2024 and sell it today you would earn a total of  194.00  from holding Centessa Pharmaceuticals PLC or generate 12.85% return on investment over 90 days.

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

Centessa Pharmaceuticals PLC  vs.  Ocular Therapeutix

Centessa Pharmaceuticals

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Centessa Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Ocular Therapeutix

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Ocular Therapeutix are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Ocular Therapeutix may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Centessa Pharmaceuticals and Ocular Therapeutix

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

The idea behind Centessa Pharmaceuticals PLC and Ocular Therapeutix 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.