Correlation Between Design Therapeutics and LMF Acquisition

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

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

Diversification Opportunities for Design Therapeutics and LMF Acquisition

0.21

Correlation Coefficient

Design Therapeutics  LMF Acquisition

Modest diversification

The 3 months correlation between Design and LMF is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and LMF Acquisition Opportunities in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LMF Acquisition Oppo 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 LMF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LMF Acquisition Oppo has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and LMF Acquisition go up and down completely randomly.

Pair Corralation between Design Therapeutics and LMF Acquisition

Given the investment horizon of 90 days Design Therapeutics is expected to under-perform the LMF Acquisition. In addition to that, Design Therapeutics is 1.01 times more volatile than LMF Acquisition Opportunities. It trades about -0.08 of its total potential returns per unit of risk. LMF Acquisition Opportunities is currently generating about 0.08 per unit of volatility. If you would invest  204.00  in LMF Acquisition Opportunities on December 27, 2024 and sell it today you would earn a total of  39.00  from holding LMF Acquisition Opportunities or generate 19.12% return on investment over 90 days.

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

Design Therapeutics  vs.  LMF Acquisition Opportunities

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.

LMF Acquisition Oppo

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in LMF Acquisition Opportunities are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent fundamental indicators, LMF Acquisition unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Design Therapeutics and LMF Acquisition

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

The idea behind Design Therapeutics and LMF Acquisition Opportunities 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.