Correlation Between Cardiff Oncology and BridgeBio Pharma

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

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

Diversification Opportunities for Cardiff Oncology and BridgeBio Pharma

-0.32

Correlation Coefficient

Cardiff Oncology  BridgeBio Pharma

Very good diversification

The 3 months correlation between Cardiff and BridgeBio is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Cardiff Oncology and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio Pharma and Cardiff Oncology 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 Cardiff Oncology are associated (or correlated) with BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of Cardiff Oncology i.e., Cardiff Oncology and BridgeBio Pharma go up and down completely randomly.

Pair Corralation between Cardiff Oncology and BridgeBio Pharma

Given the investment horizon of 90 days Cardiff Oncology is expected to generate 1.64 times more return on investment than BridgeBio Pharma. However, Cardiff Oncology is 1.64 times more volatile than BridgeBio Pharma. It trades about 0.07 of its potential returns per unit of risk. BridgeBio Pharma is currently generating about -0.04 per unit of risk. If you would invest  211.00  in Cardiff Oncology on September 6, 2024 and sell it today you would earn a total of  30.00  from holding Cardiff Oncology or generate 14.22% return on investment over 90 days.

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

Cardiff Oncology  vs.  BridgeBio Pharma

Cardiff Oncology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cardiff Oncology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Cardiff Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

BridgeBio Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cardiff Oncology and BridgeBio Pharma

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

The idea behind Cardiff Oncology and BridgeBio Pharma 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 Global Correlations module to find global opportunities by holding instruments from different markets.