Correlation Between Cytodyn and Denali Therapeutics

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

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

Diversification Opportunities for Cytodyn and Denali Therapeutics

0.55

Correlation Coefficient

Cytodyn  Denali Therapeutics

Very weak diversification

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

Pair Corralation between Cytodyn and Denali Therapeutics

Given the investment horizon of 90 days Cytodyn is expected to generate 0.97 times more return on investment than Denali Therapeutics. However, Cytodyn is 1.03 times less risky than Denali Therapeutics. It trades about -0.2 of its potential returns per unit of risk. Denali Therapeutics is currently generating about -0.28 per unit of risk. If you would invest  13.00  in Cytodyn on September 11, 2024 and sell it today you would lose (2.00) from holding Cytodyn or give up 15.38% of portfolio value over 90 days.

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

Cytodyn  vs.  Denali Therapeutics

Cytodyn

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cytodyn has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Denali Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Denali Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong essential indicators, Denali Therapeutics is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Cytodyn and Denali Therapeutics

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

The idea behind Cytodyn and Denali 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.

Check out your portfolio center.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.