Correlation Between Rezolute and Connect Biopharma

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

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

Diversification Opportunities for Rezolute and Connect Biopharma

-0.38

Correlation Coefficient

Rezolute  Connect Biopharma

Very good diversification

The 3 months correlation between Rezolute and Connect is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Rezolute and Connect Biopharma Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Connect Biopharma and Rezolute 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 Rezolute 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 Rezolute i.e., Rezolute and Connect Biopharma go up and down completely randomly.

Pair Corralation between Rezolute and Connect Biopharma

Given the investment horizon of 90 days Rezolute is expected to under-perform the Connect Biopharma. But the stock apears to be less risky and, when comparing its historical volatility, Rezolute is 1.61 times less risky than Connect Biopharma. The stock trades about -0.01 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  123.00  in Connect Biopharma Holdings on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Connect Biopharma Holdings or generate 0.0% return on investment over 90 days.

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

Rezolute  vs.  Connect Biopharma Holdings

Rezolute

Risk-Adjusted Performance

0 of 100

Very Weak

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

Connect Biopharma

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Connect Biopharma Holdings are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Connect Biopharma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Rezolute and Connect Biopharma

The main advantage of trading using opposite Rezolute and Connect Biopharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rezolute 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 Rezolute 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.