Correlation Between Design Therapeutics and Avantor

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

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

Diversification Opportunities for Design Therapeutics and Avantor

0.38

Correlation Coefficient

Design Therapeutics  Avantor

Weak diversification

The 3 months correlation between Design and Avantor is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Avantor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avantor 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 Avantor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avantor has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Avantor go up and down completely randomly.

Pair Corralation between Design Therapeutics and Avantor

Given the investment horizon of 90 days Design Therapeutics is expected to under-perform the Avantor. In addition to that, Design Therapeutics is 2.15 times more volatile than Avantor. It trades about -0.08 of its total potential returns per unit of risk. Avantor is currently generating about -0.14 per unit of volatility. If you would invest  2,108  in Avantor on December 29, 2024 and sell it today you would lose (491.00) from holding Avantor or give up 23.29% of portfolio value over 90 days.

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

Design Therapeutics  vs.  Avantor

Design Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Design Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Avantor

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avantor has generated negative risk-adjusted returns adding no value to investors with long positions. Even with inconsistent performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Design Therapeutics and Avantor

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

The idea behind Design Therapeutics and Avantor 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.