Correlation Between Molecular Partners and Entrada Therapeutics

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

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

Diversification Opportunities for Molecular Partners and Entrada Therapeutics

0.53

Correlation Coefficient

Molecular Partners  Entrada Therapeutics

Very weak diversification

The 3 months correlation between Molecular and Entrada is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Molecular Partners AG and Entrada Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entrada Therapeutics and Molecular Partners 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 Molecular Partners AG are associated (or correlated) with Entrada Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entrada Therapeutics has no effect on the direction of Molecular Partners i.e., Molecular Partners and Entrada Therapeutics go up and down completely randomly.

Pair Corralation between Molecular Partners and Entrada Therapeutics

Given the investment horizon of 90 days Molecular Partners AG is expected to generate 1.29 times more return on investment than Entrada Therapeutics. However, Molecular Partners is 1.29 times more volatile than Entrada Therapeutics. It trades about -0.01 of its potential returns per unit of risk. Entrada Therapeutics is currently generating about -0.27 per unit of risk. If you would invest  499.00  in Molecular Partners AG on December 30, 2024 and sell it today you would lose (43.00) from holding Molecular Partners AG or give up 8.62% of portfolio value over 90 days.

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

Molecular Partners AG  vs.  Entrada Therapeutics

Molecular Partners

Risk-Adjusted Performance

Very Weak

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

Entrada Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Entrada Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's fundamental 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 Molecular Partners and Entrada Therapeutics

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

The idea behind Molecular Partners AG and Entrada 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.