Correlation Between Caribou Biosciences and GRI Bio

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

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

Diversification Opportunities for Caribou Biosciences and GRI Bio

0.36

Correlation Coefficient

Caribou Biosciences  GRI Bio

Weak diversification

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

Pair Corralation between Caribou Biosciences and GRI Bio

Given the investment horizon of 90 days Caribou Biosciences is expected to under-perform the GRI Bio. But the stock apears to be less risky and, when comparing its historical volatility, Caribou Biosciences is 1.77 times less risky than GRI Bio. The stock trades about -0.46 of its potential returns per unit of risk. The GRI Bio is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  65.00  in GRI Bio on October 3, 2024 and sell it today you would earn a total of  18.00  from holding GRI Bio or generate 27.69% return on investment over 90 days.

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

Caribou Biosciences  vs.  GRI Bio

Caribou Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

GRI Bio

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GRI Bio are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, GRI Bio demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribou Biosciences and GRI Bio

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

The idea behind Caribou Biosciences and GRI Bio 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.