Correlation Between CSL and Kalvista Pharmaceuticals

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

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

Diversification Opportunities for CSL and Kalvista Pharmaceuticals

-0.78

Correlation Coefficient

CSL  Kalvista Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between CSL and Kalvista is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Kalvista Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kalvista Pharmaceuticals and CSL 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 CSL are associated (or correlated) with Kalvista Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kalvista Pharmaceuticals has no effect on the direction of CSL i.e., CSL and Kalvista Pharmaceuticals go up and down completely randomly.

Pair Corralation between CSL and Kalvista Pharmaceuticals

Assuming the 90 days horizon CSL is expected to under-perform the Kalvista Pharmaceuticals. But the pink sheet apears to be less risky and, when comparing its historical volatility, CSL is 2.38 times less risky than Kalvista Pharmaceuticals. The pink sheet trades about -0.11 of its potential returns per unit of risk. The Kalvista Pharmaceuticals is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  809.00  in Kalvista Pharmaceuticals on December 19, 2024 and sell it today you would earn a total of  428.00  from holding Kalvista Pharmaceuticals or generate 52.9% return on investment over 90 days.

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

CSL  vs.  Kalvista Pharmaceuticals

CSL

Risk-Adjusted Performance

Very Weak

Over the last 90 days CSL has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kalvista Pharmaceuticals

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kalvista Pharmaceuticals are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Kalvista Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CSL and Kalvista Pharmaceuticals

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

The idea behind CSL and Kalvista Pharmaceuticals 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.