Correlation Between Karuna Therapeutics and Phathom Pharmaceuticals

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

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

Diversification Opportunities for Karuna Therapeutics and Phathom Pharmaceuticals

0.25

Correlation Coefficient

Karuna Therapeutics  Phathom Pharmaceuticals

Modest diversification

The 3 months correlation between Karuna and Phathom is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Karuna Therapeutics and Phathom Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phathom Pharmaceuticals 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 Phathom Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phathom Pharmaceuticals has no effect on the direction of Karuna Therapeutics i.e., Karuna Therapeutics and Phathom Pharmaceuticals go up and down completely randomly.

Pair Corralation between Karuna Therapeutics and Phathom Pharmaceuticals

If you would invest  20,311  in Karuna Therapeutics on September 7, 2024 and sell it today you would earn a total of  0.00  from holding Karuna Therapeutics or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Karuna Therapeutics  vs.  Phathom Pharmaceuticals

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.

Phathom Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phathom Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Karuna Therapeutics and Phathom Pharmaceuticals

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

The idea behind Karuna Therapeutics and Phathom Pharmaceuticals 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.