Correlation Between Denali Therapeutics and Regenxbio

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

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

Diversification Opportunities for Denali Therapeutics and Regenxbio

0.51

Correlation Coefficient

Denali Therapeutics  Regenxbio

Very weak diversification

The 3 months correlation between Denali and Regenxbio is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Denali Therapeutics and Regenxbio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regenxbio and Denali Therapeutics 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 Denali Therapeutics are associated (or correlated) with Regenxbio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regenxbio has no effect on the direction of Denali Therapeutics i.e., Denali Therapeutics and Regenxbio go up and down completely randomly.

Pair Corralation between Denali Therapeutics and Regenxbio

Given the investment horizon of 90 days Denali Therapeutics is expected to generate 0.73 times more return on investment than Regenxbio. However, Denali Therapeutics is 1.38 times less risky than Regenxbio. It trades about -0.02 of its potential returns per unit of risk. Regenxbio is currently generating about -0.03 per unit of risk. If you would invest  2,559  in Denali Therapeutics on September 8, 2024 and sell it today you would lose (227.00) from holding Denali Therapeutics or give up 8.87% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Denali Therapeutics  vs.  Regenxbio

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 current stock price confusion, may contribute to short-horizon losses for the traders.

Regenxbio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Denali Therapeutics and Regenxbio

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

The idea behind Denali Therapeutics and Regenxbio 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.