Correlation Between Design Therapeutics and RAPT Therapeutics

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

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

Diversification Opportunities for Design Therapeutics and RAPT Therapeutics

0.54

Correlation Coefficient

Design Therapeutics  RAPT Therapeutics

Very weak diversification

The 3 months correlation between Design and RAPT is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and RAPT Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAPT Therapeutics 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 RAPT Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAPT Therapeutics has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and RAPT Therapeutics go up and down completely randomly.

Pair Corralation between Design Therapeutics and RAPT Therapeutics

Given the investment horizon of 90 days Design Therapeutics is expected to under-perform the RAPT Therapeutics. In addition to that, Design Therapeutics is 1.17 times more volatile than RAPT Therapeutics. It trades about -0.08 of its total potential returns per unit of risk. RAPT Therapeutics is currently generating about -0.02 per unit of volatility. If you would invest  162.00  in RAPT Therapeutics on December 28, 2024 and sell it today you would lose (20.00) from holding RAPT Therapeutics or give up 12.35% of portfolio value over 90 days.

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

Design Therapeutics  vs.  RAPT Therapeutics

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.

RAPT Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days RAPT Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RAPT Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Design Therapeutics and RAPT Therapeutics

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

The idea behind Design Therapeutics and RAPT Therapeutics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.