Correlation Between Caribou Biosciences and Royalty Pharma

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

By analyzing existing cross correlation between Caribou Biosciences and Royalty Pharma Plc, you can compare the effects of market volatilities on Caribou Biosciences and Royalty Pharma 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 Royalty Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribou Biosciences and Royalty Pharma.

Diversification Opportunities for Caribou Biosciences and Royalty Pharma

-0.8

Correlation Coefficient

Caribou Biosciences  Royalty Pharma

Pay attention - limited upside

The 3 months correlation between Caribou and Royalty is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Caribou Biosciences and Royalty Pharma Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royalty Pharma Plc 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 Royalty Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royalty Pharma Plc has no effect on the direction of Caribou Biosciences i.e., Caribou Biosciences and Royalty Pharma go up and down completely randomly.

Pair Corralation between Caribou Biosciences and Royalty Pharma

Given the investment horizon of 90 days Caribou Biosciences is expected to under-perform the Royalty Pharma. In addition to that, Caribou Biosciences is 2.14 times more volatile than Royalty Pharma Plc. It trades about -0.18 of its total potential returns per unit of risk. Royalty Pharma Plc is currently generating about 0.19 per unit of volatility. If you would invest  2,515  in Royalty Pharma Plc on December 29, 2024 and sell it today you would earn a total of  622.00  from holding Royalty Pharma Plc or generate 24.73% return on investment over 90 days.

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

Caribou Biosciences  vs.  Royalty Pharma Plc

Caribou Biosciences

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's fundamental drivers remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Royalty Pharma Plc

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Royalty Pharma Plc are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Royalty Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribou Biosciences and Royalty Pharma

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

The idea behind Caribou Biosciences and Royalty Pharma Plc 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..