Correlation Between Opthea and Capricor Therapeutics

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

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

Diversification Opportunities for Opthea and Capricor Therapeutics

0.67

Correlation Coefficient

Opthea  Capricor Therapeutics

Poor diversification

The 3 months correlation between Opthea and Capricor is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Opthea and Capricor Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricor Therapeutics and Opthea 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 Opthea are associated (or correlated) with Capricor Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricor Therapeutics has no effect on the direction of Opthea i.e., Opthea and Capricor Therapeutics go up and down completely randomly.

Pair Corralation between Opthea and Capricor Therapeutics

Considering the 90-day investment horizon Opthea is expected to generate 13.14 times less return on investment than Capricor Therapeutics. But when comparing it to its historical volatility, Opthea is 2.58 times less risky than Capricor Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Capricor Therapeutics is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  457.00  in Capricor Therapeutics on August 30, 2024 and sell it today you would earn a total of  1,447  from holding Capricor Therapeutics or generate 316.63% return on investment over 90 days.

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

Opthea  vs.  Capricor Therapeutics

Opthea

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, Opthea unveiled solid returns over the last few months and may actually be approaching a breakup point.

Capricor Therapeutics

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Capricor Therapeutics are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Capricor Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Opthea and Capricor Therapeutics

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

The idea behind Opthea and Capricor 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.