Correlation Between Connect Biopharma and Travere Therapeutics

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

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

Diversification Opportunities for Connect Biopharma and Travere Therapeutics

-0.55

Correlation Coefficient

Connect Biopharma  Travere Therapeutics

Excellent diversification

The 3 months correlation between Connect and Travere is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings and Travere Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Travere Therapeutics and Connect Biopharma 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 Connect Biopharma Holdings are associated (or correlated) with Travere Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Travere Therapeutics has no effect on the direction of Connect Biopharma i.e., Connect Biopharma and Travere Therapeutics go up and down completely randomly.

Pair Corralation between Connect Biopharma and Travere Therapeutics

Given the investment horizon of 90 days Connect Biopharma is expected to generate 4.56 times less return on investment than Travere Therapeutics. In addition to that, Connect Biopharma is 1.64 times more volatile than Travere Therapeutics. It trades about 0.02 of its total potential returns per unit of risk. Travere Therapeutics is currently generating about 0.16 per unit of volatility. If you would invest  949.00  in Travere Therapeutics on October 7, 2024 and sell it today you would earn a total of  937.00  from holding Travere Therapeutics or generate 98.74% return on investment over 90 days.

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

Connect Biopharma Holdings  vs.  Travere Therapeutics

Connect Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Connect Biopharma is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Travere Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Travere Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Travere Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Connect Biopharma and Travere Therapeutics

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

The idea behind Connect Biopharma Holdings and Travere 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.