Correlation Between Rockwell Medical and Connect Biopharma

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

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

Diversification Opportunities for Rockwell Medical and Connect Biopharma

0.54

Correlation Coefficient

Rockwell Medical  Connect Biopharma

Very weak diversification

The 3 months correlation between Rockwell and Connect is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Rockwell Medical and Connect Biopharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connect Biopharma and Rockwell Medical 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 Rockwell Medical are associated (or correlated) with Connect Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Connect Biopharma has no effect on the direction of Rockwell Medical i.e., Rockwell Medical and Connect Biopharma go up and down completely randomly.

Pair Corralation between Rockwell Medical and Connect Biopharma

Given the investment horizon of 90 days Rockwell Medical is expected to under-perform the Connect Biopharma. But the stock apears to be less risky and, when comparing its historical volatility, Rockwell Medical is 1.66 times less risky than Connect Biopharma. The stock trades about -0.14 of its potential returns per unit of risk. The Connect Biopharma Holdings is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Connect Biopharma Holdings on December 1, 2024 and sell it today you would lose (17.00) from holding Connect Biopharma Holdings or give up 15.74% of portfolio value over 90 days.

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

Rockwell Medical  vs.  Connect Biopharma Holdings

Rockwell Medical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rockwell Medical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Connect Biopharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Rockwell Medical and Connect Biopharma

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

The idea behind Rockwell Medical and Connect Biopharma Holdings 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.