Correlation Between LianBio ADR and Tcr2 Therapeutics

Can any of the company-specific risk be diversified away by investing in both LianBio ADR and Tcr2 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 LianBio ADR and Tcr2 Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between LianBio ADR and Tcr2 Therapeutics, you can compare the effects of market volatilities on LianBio ADR and Tcr2 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 LianBio ADR with a short position of Tcr2 Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of LianBio ADR and Tcr2 Therapeutics.

Diversification Opportunities for LianBio ADR and Tcr2 Therapeutics

0.2

Correlation Coefficient

LianBio ADR  Tcr2 Therapeutics

Modest diversification

The 3 months correlation between LianBio and Tcr2 is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding LianBio ADR and Tcr2 Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tcr2 Therapeutics and LianBio ADR 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 LianBio ADR are associated (or correlated) with Tcr2 Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tcr2 Therapeutics has no effect on the direction of LianBio ADR i.e., LianBio ADR and Tcr2 Therapeutics go up and down completely randomly.

Pair Corralation between LianBio ADR and Tcr2 Therapeutics

Given the investment horizon of 90 days LianBio ADR is expected to generate 1.85 times less return on investment than Tcr2 Therapeutics. But when comparing it to its historical volatility, LianBio ADR is 1.2 times less risky than Tcr2 Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Tcr2 Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  144.00  in Tcr2 Therapeutics on October 25, 2024 and sell it today you would earn a total of  4.00  from holding Tcr2 Therapeutics or generate 2.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	70.34%
Values	Daily Returns

LianBio ADR  vs.  Tcr2 Therapeutics

LianBio ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Tcr2 Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tcr2 Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Tcr2 Therapeutics is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with LianBio ADR and Tcr2 Therapeutics

The main advantage of trading using opposite LianBio ADR and Tcr2 Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if LianBio ADR position performs unexpectedly, Tcr2 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 Tcr2 Therapeutics will offset losses from the drop in Tcr2 Therapeutics' long position.

The idea behind LianBio ADR and Tcr2 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.