Correlation Between Denali Therapeutics and Alpha Teknova

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

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

Diversification Opportunities for Denali Therapeutics and Alpha Teknova

-0.65

Correlation Coefficient

Denali Therapeutics  Alpha Teknova

Excellent diversification

The 3 months correlation between Denali and Alpha is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Denali Therapeutics and Alpha Teknova in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Teknova 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 Alpha Teknova. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Teknova has no effect on the direction of Denali Therapeutics i.e., Denali Therapeutics and Alpha Teknova go up and down completely randomly.

Pair Corralation between Denali Therapeutics and Alpha Teknova

Given the investment horizon of 90 days Denali Therapeutics is expected to under-perform the Alpha Teknova. But the stock apears to be less risky and, when comparing its historical volatility, Denali Therapeutics is 2.03 times less risky than Alpha Teknova. The stock trades about -0.42 of its potential returns per unit of risk. The Alpha Teknova is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  844.00  in Alpha Teknova on October 9, 2024 and sell it today you would earn a total of  62.00  from holding Alpha Teknova or generate 7.35% return on investment over 90 days.

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

Denali Therapeutics  vs.  Alpha Teknova

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 weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Alpha Teknova

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Teknova are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Alpha Teknova displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Denali Therapeutics and Alpha Teknova

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

The idea behind Denali Therapeutics and Alpha Teknova 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.