Correlation Between Arcus Biosciences and Alpha Tau

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

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

Diversification Opportunities for Arcus Biosciences and Alpha Tau

-0.02

Correlation Coefficient

Arcus Biosciences  Alpha Tau

Good diversification

The 3 months correlation between Arcus and Alpha is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Arcus Biosciences and Alpha Tau Medical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Tau Medical and Arcus Biosciences 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 Arcus Biosciences are associated (or correlated) with Alpha Tau. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Tau Medical has no effect on the direction of Arcus Biosciences i.e., Arcus Biosciences and Alpha Tau go up and down completely randomly.

Pair Corralation between Arcus Biosciences and Alpha Tau

Given the investment horizon of 90 days Arcus Biosciences is expected to generate 1.15 times more return on investment than Alpha Tau. However, Arcus Biosciences is 1.15 times more volatile than Alpha Tau Medical. It trades about 0.03 of its potential returns per unit of risk. Alpha Tau Medical is currently generating about 0.01 per unit of risk. If you would invest  1,415  in Arcus Biosciences on September 23, 2024 and sell it today you would earn a total of  135.00  from holding Arcus Biosciences or generate 9.54% return on investment over 90 days.

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

Arcus Biosciences  vs.  Alpha Tau Medical

Arcus Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcus Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Arcus Biosciences is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Alpha Tau Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Tau Medical are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alpha Tau unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arcus Biosciences and Alpha Tau

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

The idea behind Arcus Biosciences and Alpha Tau Medical 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.