Correlation Between Sensei Biotherapeutics and Third Harmonic

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

By analyzing existing cross correlation between Sensei Biotherapeutics and Third Harmonic Bio, you can compare the effects of market volatilities on Sensei Biotherapeutics and Third Harmonic 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 Third Harmonic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sensei Biotherapeutics and Third Harmonic.

Diversification Opportunities for Sensei Biotherapeutics and Third Harmonic

0.02

Correlation Coefficient

Sensei Biotherapeutics  Third Harmonic

Significant diversification

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

Pair Corralation between Sensei Biotherapeutics and Third Harmonic

Given the investment horizon of 90 days Sensei Biotherapeutics is expected to generate 2.96 times more return on investment than Third Harmonic. However, Sensei Biotherapeutics is 2.96 times more volatile than Third Harmonic Bio. It trades about 0.04 of its potential returns per unit of risk. Third Harmonic Bio is currently generating about 0.05 per unit of risk. If you would invest  60.00  in Sensei Biotherapeutics on August 31, 2024 and sell it today you would lose (6.00) from holding Sensei Biotherapeutics or give up 10.0% of portfolio value over 90 days.

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

Sensei Biotherapeutics  vs.  Third Harmonic Bio

Sensei Biotherapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Sensei Biotherapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Sensei Biotherapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Third Harmonic Bio

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Third Harmonic Bio are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Third Harmonic exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sensei Biotherapeutics and Third Harmonic

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

The idea behind Sensei Biotherapeutics and Third Harmonic Bio 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.