Correlation Between Ocular Therapeutix and CytomX Therapeutics

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

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

Diversification Opportunities for Ocular Therapeutix and CytomX Therapeutics

-0.37

Correlation Coefficient

Ocular Therapeutix  CytomX Therapeutics

Very good diversification

The 3 months correlation between Ocular and CytomX is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Ocular Therapeutix and CytomX Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CytomX Therapeutics and Ocular Therapeutix 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 Ocular Therapeutix are associated (or correlated) with CytomX Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CytomX Therapeutics has no effect on the direction of Ocular Therapeutix i.e., Ocular Therapeutix and CytomX Therapeutics go up and down completely randomly.

Pair Corralation between Ocular Therapeutix and CytomX Therapeutics

Given the investment horizon of 90 days Ocular Therapeutix is expected to generate 1.05 times more return on investment than CytomX Therapeutics. However, Ocular Therapeutix is 1.05 times more volatile than CytomX Therapeutics. It trades about 0.14 of its potential returns per unit of risk. CytomX Therapeutics is currently generating about -0.09 per unit of risk. If you would invest  551.00  in Ocular Therapeutix on September 1, 2024 and sell it today you would earn a total of  438.00  from holding Ocular Therapeutix or generate 79.49% return on investment over 90 days.

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

Ocular Therapeutix  vs.  CytomX Therapeutics

Ocular Therapeutix

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ocular Therapeutix are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Ocular Therapeutix disclosed solid returns over the last few months and may actually be approaching a breakup point.

CytomX Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Ocular Therapeutix and CytomX Therapeutics

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

The idea behind Ocular Therapeutix and CytomX 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.