Correlation Between Kodiak Sciences and Capricor Therapeutics

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

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

Diversification Opportunities for Kodiak Sciences and Capricor Therapeutics

-0.76

Correlation Coefficient

Kodiak Sciences  Capricor Therapeutics

Pay attention - limited upside

The 3 months correlation between Kodiak and Capricor is -0.76. Overlapping area represents the amount of risk that can be diversified away by holding Kodiak Sciences and Capricor Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricor Therapeutics and Kodiak Sciences 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 Kodiak Sciences are associated (or correlated) with Capricor Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricor Therapeutics has no effect on the direction of Kodiak Sciences i.e., Kodiak Sciences and Capricor Therapeutics go up and down completely randomly.

Pair Corralation between Kodiak Sciences and Capricor Therapeutics

Considering the 90-day investment horizon Kodiak Sciences is expected to generate 2.23 times more return on investment than Capricor Therapeutics. However, Kodiak Sciences is 2.23 times more volatile than Capricor Therapeutics. It trades about 0.12 of its potential returns per unit of risk. Capricor Therapeutics is currently generating about 0.08 per unit of risk. If you would invest  783.00  in Kodiak Sciences on October 7, 2024 and sell it today you would earn a total of  129.00  from holding Kodiak Sciences or generate 16.48% return on investment over 90 days.

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

Kodiak Sciences  vs.  Capricor Therapeutics

Kodiak Sciences

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Sciences are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Kodiak Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

Capricor Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Capricor Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Capricor Therapeutics is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Kodiak Sciences and Capricor Therapeutics

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

The idea behind Kodiak Sciences and Capricor Therapeutics 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 Transaction History module to view history of all your transactions and understand their impact on performance.