Correlation Between Sonnet Biotherapeutics and Cidara Therapeutics

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

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

Diversification Opportunities for Sonnet Biotherapeutics and Cidara Therapeutics

-0.11

Correlation Coefficient

Sonnet Biotherapeutics  Cidara Therapeutics

Good diversification

The 3 months correlation between Sonnet and Cidara is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Sonnet Biotherapeutics Holding and Cidara Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cidara Therapeutics and Sonnet 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 Sonnet Biotherapeutics Holdings are associated (or correlated) with Cidara Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cidara Therapeutics has no effect on the direction of Sonnet Biotherapeutics i.e., Sonnet Biotherapeutics and Cidara Therapeutics go up and down completely randomly.

Pair Corralation between Sonnet Biotherapeutics and Cidara Therapeutics

Given the investment horizon of 90 days Sonnet Biotherapeutics is expected to generate 7.25 times less return on investment than Cidara Therapeutics. In addition to that, Sonnet Biotherapeutics is 1.33 times more volatile than Cidara Therapeutics. It trades about 0.0 of its total potential returns per unit of risk. Cidara Therapeutics is currently generating about 0.02 per unit of volatility. If you would invest  2,322  in Cidara Therapeutics on December 20, 2024 and sell it today you would lose (12.00) from holding Cidara Therapeutics or give up 0.52% of portfolio value over 90 days.

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

Sonnet Biotherapeutics Holding  vs.  Cidara Therapeutics

Sonnet Biotherapeutics

Risk-Adjusted Performance

Very Weak

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

Cidara Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cidara Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Cidara 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 Sonnet Biotherapeutics and Cidara Therapeutics

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

The idea behind Sonnet Biotherapeutics Holdings and Cidara 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.

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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.