Correlation Between HCW Biologics and Alpha Tau

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

By analyzing existing cross correlation between HCW Biologics and Alpha Tau Medical, you can compare the effects of market volatilities on HCW Biologics and Alpha Tau 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 HCW Biologics with a short position of Alpha Tau. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCW Biologics and Alpha Tau.

Diversification Opportunities for HCW Biologics and Alpha Tau

-0.3

Correlation Coefficient

HCW Biologics  Alpha Tau

Very good diversification

The 3 months correlation between HCW and Alpha is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics and Alpha Tau Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Tau Medical and HCW Biologics 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 HCW Biologics are associated (or correlated) with Alpha Tau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Tau Medical has no effect on the direction of HCW Biologics i.e., HCW Biologics and Alpha Tau go up and down completely randomly.

Pair Corralation between HCW Biologics and Alpha Tau

Given the investment horizon of 90 days HCW Biologics is expected to under-perform the Alpha Tau. But the stock apears to be less risky and, when comparing its historical volatility, HCW Biologics is 5.76 times less risky than Alpha Tau. The stock trades about -0.21 of its potential returns per unit of risk. The Alpha Tau Medical is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  32.00  in Alpha Tau Medical on October 21, 2024 and sell it today you would lose (1.00) from holding Alpha Tau Medical or give up 3.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

HCW Biologics  vs.  Alpha Tau Medical

HCW Biologics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HCW Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Alpha Tau Medical

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Tau Medical are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Alpha Tau showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCW Biologics and Alpha Tau

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

The idea behind HCW Biologics and Alpha Tau Medical 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.

Check out your portfolio center.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.