Correlation Between CSL and ProKidney Corp

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

By analyzing existing cross correlation between CSL and ProKidney Corp, you can compare the effects of market volatilities on CSL and ProKidney Corp 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 ProKidney Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and ProKidney Corp.

Diversification Opportunities for CSL and ProKidney Corp

0.08

Correlation Coefficient

CSL  ProKidney Corp

Significant diversification

The 3 months correlation between CSL and ProKidney is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CSL and ProKidney Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProKidney Corp 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 ProKidney Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProKidney Corp has no effect on the direction of CSL i.e., CSL and ProKidney Corp go up and down completely randomly.

Pair Corralation between CSL and ProKidney Corp

Assuming the 90 days horizon CSL is expected to generate 0.13 times more return on investment than ProKidney Corp. However, CSL is 7.66 times less risky than ProKidney Corp. It trades about 0.01 of its potential returns per unit of risk. ProKidney Corp is currently generating about -0.13 per unit of risk. If you would invest  8,944  in CSL on October 12, 2024 and sell it today you would earn a total of  16.00  from holding CSL or generate 0.18% return on investment over 90 days.

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

CSL  vs.  ProKidney Corp

CSL

Risk-Adjusted Performance

0 of 100

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.

ProKidney Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in ProKidney Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, ProKidney Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with CSL and ProKidney Corp

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

The idea behind CSL and ProKidney Corp 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 Transaction History module to view history of all your transactions and understand their impact on performance.