Correlation Between Lineage Cell and Connect Biopharma

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

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

Diversification Opportunities for Lineage Cell and Connect Biopharma

0.14

Correlation Coefficient

Lineage Cell  Connect Biopharma

Average diversification

The 3 months correlation between Lineage and Connect is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Lineage Cell Therapeutics and Connect Biopharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connect Biopharma and Lineage Cell 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 Lineage Cell Therapeutics are associated (or correlated) with Connect Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connect Biopharma has no effect on the direction of Lineage Cell i.e., Lineage Cell and Connect Biopharma go up and down completely randomly.

Pair Corralation between Lineage Cell and Connect Biopharma

Given the investment horizon of 90 days Lineage Cell Therapeutics is expected to generate 1.27 times more return on investment than Connect Biopharma. However, Lineage Cell is 1.27 times more volatile than Connect Biopharma Holdings. It trades about 0.02 of its potential returns per unit of risk. Connect Biopharma Holdings is currently generating about -0.22 per unit of risk. If you would invest  50.00  in Lineage Cell Therapeutics on December 29, 2024 and sell it today you would lose (1.00) from holding Lineage Cell Therapeutics or give up 2.0% of portfolio value over 90 days.

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

Lineage Cell Therapeutics  vs.  Connect Biopharma Holdings

Lineage Cell Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lineage Cell Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lineage Cell may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Connect Biopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Lineage Cell and Connect Biopharma

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

The idea behind Lineage Cell Therapeutics and Connect Biopharma Holdings 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.