Correlation Between Sonnet Biotherapeutics and Greenwich Lifesciences

Can any of the company-specific risk be diversified away by investing in both Sonnet Biotherapeutics and Greenwich Lifesciences 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 Greenwich Lifesciences 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 Greenwich Lifesciences, you can compare the effects of market volatilities on Sonnet Biotherapeutics and Greenwich Lifesciences 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 Greenwich Lifesciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sonnet Biotherapeutics and Greenwich Lifesciences.

Diversification Opportunities for Sonnet Biotherapeutics and Greenwich Lifesciences

0.76

Correlation Coefficient

Sonnet Biotherapeutics  Greenwich Lifesciences

Poor diversification

The 3 months correlation between Sonnet and Greenwich is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Sonnet Biotherapeutics Holding and Greenwich Lifesciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenwich Lifesciences 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 Greenwich Lifesciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenwich Lifesciences has no effect on the direction of Sonnet Biotherapeutics i.e., Sonnet Biotherapeutics and Greenwich Lifesciences go up and down completely randomly.

Pair Corralation between Sonnet Biotherapeutics and Greenwich Lifesciences

Given the investment horizon of 90 days Sonnet Biotherapeutics Holdings is expected to generate 1.93 times more return on investment than Greenwich Lifesciences. However, Sonnet Biotherapeutics is 1.93 times more volatile than Greenwich Lifesciences. It trades about 0.01 of its potential returns per unit of risk. Greenwich Lifesciences is currently generating about -0.04 per unit of risk. If you would invest  144.00  in Sonnet Biotherapeutics Holdings on December 22, 2024 and sell it today you would lose (6.00) from holding Sonnet Biotherapeutics Holdings or give up 4.17% of portfolio value over 90 days.

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

Sonnet Biotherapeutics Holding  vs.  Greenwich Lifesciences

Sonnet Biotherapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sonnet Biotherapeutics Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Greenwich Lifesciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Greenwich Lifesciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Sonnet Biotherapeutics and Greenwich Lifesciences

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

The idea behind Sonnet Biotherapeutics Holdings and Greenwich Lifesciences 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.