Correlation Between Replimune and Karuna Therapeutics

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

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

Diversification Opportunities for Replimune and Karuna Therapeutics

0.05

Correlation Coefficient

Replimune  Karuna Therapeutics

Significant diversification

The 3 months correlation between Replimune and Karuna is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Replimune Group and Karuna Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karuna Therapeutics and Replimune 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 Replimune Group are associated (or correlated) with Karuna Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karuna Therapeutics has no effect on the direction of Replimune i.e., Replimune and Karuna Therapeutics go up and down completely randomly.

Pair Corralation between Replimune and Karuna Therapeutics

If you would invest  1,465  in Replimune Group on September 10, 2024 and sell it today you would lose (201.00) from holding Replimune Group or give up 13.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.34%
Values	Daily Returns

Replimune Group  vs.  Karuna Therapeutics

Replimune Group

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Replimune Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Replimune disclosed solid returns over the last few months and may actually be approaching a breakup point.

Karuna Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Replimune and Karuna Therapeutics

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

The idea behind Replimune Group and Karuna 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.