Correlation Between Design Therapeutics and Compugen

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

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

Diversification Opportunities for Design Therapeutics and Compugen

-0.59

Correlation Coefficient

Design Therapeutics  Compugen

Excellent diversification

The 3 months correlation between Design and Compugen is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Compugen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Compugen 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 Compugen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Compugen has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Compugen go up and down completely randomly.

Pair Corralation between Design Therapeutics and Compugen

Given the investment horizon of 90 days Design Therapeutics is expected to generate 5.53 times less return on investment than Compugen. In addition to that, Design Therapeutics is 1.4 times more volatile than Compugen. It trades about 0.02 of its total potential returns per unit of risk. Compugen is currently generating about 0.12 per unit of volatility. If you would invest  172.00  in Compugen on October 24, 2024 and sell it today you would earn a total of  53.00  from holding Compugen or generate 30.81% return on investment over 90 days.

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

Design Therapeutics  vs.  Compugen

Design Therapeutics

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Design Therapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Compugen

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Compugen are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Compugen displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Design Therapeutics and Compugen

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

The idea behind Design Therapeutics and Compugen 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.