Correlation Between Century Therapeutics and Caribou Biosciences

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

By analyzing existing cross correlation between Century Therapeutics and Caribou Biosciences, you can compare the effects of market volatilities on Century Therapeutics and Caribou Biosciences 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 Century Therapeutics with a short position of Caribou Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Therapeutics and Caribou Biosciences.

Diversification Opportunities for Century Therapeutics and Caribou Biosciences

-0.08

Correlation Coefficient

Century Therapeutics  Caribou Biosciences

Good diversification

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

Pair Corralation between Century Therapeutics and Caribou Biosciences

Given the investment horizon of 90 days Century Therapeutics is expected to generate 20.3 times less return on investment than Caribou Biosciences. In addition to that, Century Therapeutics is 1.05 times more volatile than Caribou Biosciences. It trades about 0.0 of its total potential returns per unit of risk. Caribou Biosciences is currently generating about 0.03 per unit of volatility. If you would invest  216.00  in Caribou Biosciences on August 30, 2024 and sell it today you would earn a total of  4.00  from holding Caribou Biosciences or generate 1.85% return on investment over 90 days.

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

Century Therapeutics  vs.  Caribou Biosciences

Century Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Century Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Caribou Biosciences

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Caribou Biosciences are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, Caribou Biosciences may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Century Therapeutics and Caribou Biosciences

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

The idea behind Century Therapeutics and Caribou Biosciences 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.