Correlation Between Cipher Pharmaceuticals and Knight Therapeutics

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

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

Diversification Opportunities for Cipher Pharmaceuticals and Knight Therapeutics

0.34

Correlation Coefficient

Cipher Pharmaceuticals  Knight Therapeutics

Weak diversification

The 3 months correlation between Cipher and Knight is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Cipher Pharmaceuticals and Knight Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Knight Therapeutics and Cipher 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 Cipher Pharmaceuticals are associated (or correlated) with Knight Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Knight Therapeutics has no effect on the direction of Cipher Pharmaceuticals i.e., Cipher Pharmaceuticals and Knight Therapeutics go up and down completely randomly.

Pair Corralation between Cipher Pharmaceuticals and Knight Therapeutics

Assuming the 90 days trading horizon Cipher Pharmaceuticals is expected to under-perform the Knight Therapeutics. In addition to that, Cipher Pharmaceuticals is 1.83 times more volatile than Knight Therapeutics. It trades about -0.04 of its total potential returns per unit of risk. Knight Therapeutics is currently generating about -0.02 per unit of volatility. If you would invest  548.00  in Knight Therapeutics on September 3, 2024 and sell it today you would lose (21.00) from holding Knight Therapeutics or give up 3.83% of portfolio value over 90 days.

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

Cipher Pharmaceuticals  vs.  Knight Therapeutics

Cipher Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Knight Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Knight Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Knight Therapeutics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cipher Pharmaceuticals and Knight Therapeutics

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

The idea behind Cipher Pharmaceuticals and Knight 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.