Correlation Between Karuna Therapeutics and Dyne Therapeutics

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

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

Diversification Opportunities for Karuna Therapeutics and Dyne Therapeutics

-0.13

Correlation Coefficient

Karuna Therapeutics  Dyne Therapeutics

Good diversification

The 3 months correlation between Karuna and Dyne is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Karuna Therapeutics and Dyne Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dyne Therapeutics and Karuna 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 Karuna Therapeutics are associated (or correlated) with Dyne Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dyne Therapeutics has no effect on the direction of Karuna Therapeutics i.e., Karuna Therapeutics and Dyne Therapeutics go up and down completely randomly.

Pair Corralation between Karuna Therapeutics and Dyne Therapeutics

Given the investment horizon of 90 days Karuna Therapeutics is expected to generate 73.81 times less return on investment than Dyne Therapeutics. But when comparing it to its historical volatility, Karuna Therapeutics is 2.13 times less risky than Dyne Therapeutics. It trades about 0.0 of its potential returns per unit of risk. Dyne Therapeutics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,165  in Dyne Therapeutics on September 1, 2024 and sell it today you would earn a total of  1,896  from holding Dyne Therapeutics or generate 162.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.11%
Values	Daily Returns

Karuna Therapeutics  vs.  Dyne Therapeutics

Karuna Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dyne Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dyne Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dyne Therapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Karuna Therapeutics and Dyne Therapeutics

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

The idea behind Karuna Therapeutics and Dyne 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..