Correlation Between Champions Oncology and Decibel Therapeutics

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

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

Diversification Opportunities for Champions Oncology and Decibel Therapeutics

-0.55

Correlation Coefficient

Champions Oncology  Decibel Therapeutics

Excellent diversification

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

Pair Corralation between Champions Oncology and Decibel Therapeutics

If you would invest  431.00  in Champions Oncology on October 1, 2024 and sell it today you would earn a total of  418.00  from holding Champions Oncology or generate 96.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Champions Oncology  vs.  Decibel Therapeutics

Champions Oncology

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Champions Oncology are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Champions Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

Decibel Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decibel Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Decibel Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Champions Oncology and Decibel Therapeutics

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

The idea behind Champions Oncology and Decibel 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.