Correlation Between HCW Biologics and Molecular Partners

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

By analyzing existing cross correlation between HCW Biologics and Molecular Partners AG, you can compare the effects of market volatilities on HCW Biologics and Molecular Partners 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 Molecular Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of HCW Biologics and Molecular Partners.

Diversification Opportunities for HCW Biologics and Molecular Partners

0.08

Correlation Coefficient

HCW Biologics  Molecular Partners

Significant diversification

The 3 months correlation between HCW and Molecular is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics and Molecular Partners AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Molecular Partners 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 Molecular Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Molecular Partners has no effect on the direction of HCW Biologics i.e., HCW Biologics and Molecular Partners go up and down completely randomly.

Pair Corralation between HCW Biologics and Molecular Partners

Given the investment horizon of 90 days HCW Biologics is expected to generate 5.39 times more return on investment than Molecular Partners. However, HCW Biologics is 5.39 times more volatile than Molecular Partners AG. It trades about 0.04 of its potential returns per unit of risk. Molecular Partners AG is currently generating about -0.07 per unit of risk. If you would invest  47.00  in HCW Biologics on November 29, 2024 and sell it today you would lose (9.00) from holding HCW Biologics or give up 19.15% of portfolio value over 90 days.

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

HCW Biologics  vs.  Molecular Partners AG

HCW Biologics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 2 (%) 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.

Molecular Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Molecular Partners AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with HCW Biologics and Molecular Partners

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

The idea behind HCW Biologics and Molecular Partners AG 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.