Correlation Between Design Therapeutics and SolGold Plc

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

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

Diversification Opportunities for Design Therapeutics and SolGold Plc

-0.61

Correlation Coefficient

Design Therapeutics  SolGold Plc

Excellent diversification

The 3 months correlation between Design and SolGold is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and SolGold Plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SolGold Plc 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 SolGold Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SolGold Plc has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and SolGold Plc go up and down completely randomly.

Pair Corralation between Design Therapeutics and SolGold Plc

Given the investment horizon of 90 days Design Therapeutics is expected to under-perform the SolGold Plc. But the stock apears to be less risky and, when comparing its historical volatility, Design Therapeutics is 1.26 times less risky than SolGold Plc. The stock trades about -0.22 of its potential returns per unit of risk. The SolGold Plc is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  11.00  in SolGold Plc on October 12, 2024 and sell it today you would lose (2.00) from holding SolGold Plc or give up 18.18% of portfolio value over 90 days.

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

Design Therapeutics  vs.  SolGold Plc

Design Therapeutics

Risk-Adjusted Performance

1 of 100

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 unsteady technical and fundamental indicators, Design Therapeutics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

SolGold Plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SolGold Plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Design Therapeutics and SolGold Plc

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

The idea behind Design Therapeutics and SolGold Plc 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.