Correlation Between Design Therapeutics and Whiting Petroleum

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

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

Diversification Opportunities for Design Therapeutics and Whiting Petroleum

0.18

Correlation Coefficient

Design Therapeutics  Whiting Petroleum

Average diversification

The 3 months correlation between Design and Whiting is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Whiting Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Whiting Petroleum 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 Whiting Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Whiting Petroleum has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Whiting Petroleum go up and down completely randomly.

Pair Corralation between Design Therapeutics and Whiting Petroleum

Given the investment horizon of 90 days Design Therapeutics is expected to generate 1.26 times less return on investment than Whiting Petroleum. In addition to that, Design Therapeutics is 1.15 times more volatile than Whiting Petroleum. It trades about 0.02 of its total potential returns per unit of risk. Whiting Petroleum is currently generating about 0.03 per unit of volatility. If you would invest  1,926  in Whiting Petroleum on October 25, 2024 and sell it today you would earn a total of  274.00  from holding Whiting Petroleum or generate 14.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	80.16%
Values	Daily Returns

Design Therapeutics  vs.  Whiting Petroleum

Design Therapeutics

Risk-Adjusted Performance

0 of 100

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 very healthy technical and fundamental indicators, Design Therapeutics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Whiting Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Whiting Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Whiting Petroleum is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Design Therapeutics and Whiting Petroleum

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

The idea behind Design Therapeutics and Whiting Petroleum 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.