Correlation Between Sensei Biotherapeutics and Design Therapeutics

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

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

Diversification Opportunities for Sensei Biotherapeutics and Design Therapeutics

-0.08

Correlation Coefficient

Sensei Biotherapeutics  Design Therapeutics

Good diversification

The 3 months correlation between Sensei and Design is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Sensei Biotherapeutics and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics and Sensei Biotherapeutics 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 Sensei Biotherapeutics are associated (or correlated) with Design Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design Therapeutics has no effect on the direction of Sensei Biotherapeutics i.e., Sensei Biotherapeutics and Design Therapeutics go up and down completely randomly.

Pair Corralation between Sensei Biotherapeutics and Design Therapeutics

Given the investment horizon of 90 days Sensei Biotherapeutics is expected to generate 0.71 times more return on investment than Design Therapeutics. However, Sensei Biotherapeutics is 1.4 times less risky than Design Therapeutics. It trades about 0.22 of its potential returns per unit of risk. Design Therapeutics is currently generating about -0.29 per unit of risk. If you would invest  44.00  in Sensei Biotherapeutics on October 12, 2024 and sell it today you would earn a total of  9.00  from holding Sensei Biotherapeutics or generate 20.45% return on investment over 90 days.

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

Sensei Biotherapeutics  vs.  Design Therapeutics

Sensei Biotherapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sensei Biotherapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Sensei Biotherapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Design Therapeutics

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Design Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Design Therapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Sensei Biotherapeutics and Design Therapeutics

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

The idea behind Sensei Biotherapeutics and Design 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.