Correlation Between Design Therapeutics and Alligator Energy

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

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

Diversification Opportunities for Design Therapeutics and Alligator Energy

-0.52

Correlation Coefficient

Design Therapeutics  Alligator Energy

Excellent diversification

The 3 months correlation between Design and Alligator is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Alligator Energy Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alligator Energy and Design 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 Design Therapeutics are associated (or correlated) with Alligator Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alligator Energy has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Alligator Energy go up and down completely randomly.

Pair Corralation between Design Therapeutics and Alligator Energy

Given the investment horizon of 90 days Design Therapeutics is expected to generate 11.56 times less return on investment than Alligator Energy. But when comparing it to its historical volatility, Design Therapeutics is 2.79 times less risky than Alligator Energy. It trades about 0.02 of its potential returns per unit of risk. Alligator Energy Limited is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  3.20  in Alligator Energy Limited on October 11, 2024 and sell it today you would lose (0.84) from holding Alligator Energy Limited or give up 26.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.6%
Values	Daily Returns

Design Therapeutics  vs.  Alligator Energy Limited

Design Therapeutics

Risk-Adjusted Performance

2 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Design Therapeutics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Alligator Energy

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Alligator Energy Limited are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Alligator Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Design Therapeutics and Alligator Energy

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

The idea behind Design Therapeutics and Alligator Energy Limited 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.