Correlation Between Scholar Rock and Lineage Cell

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

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

Diversification Opportunities for Scholar Rock and Lineage Cell

0.26

Correlation Coefficient

Scholar Rock  Lineage Cell

Modest diversification

The 3 months correlation between Scholar and Lineage is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Scholar Rock Holding and Lineage Cell Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lineage Cell Therapeutics and Scholar Rock 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 Scholar Rock Holding are associated (or correlated) with Lineage Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lineage Cell Therapeutics has no effect on the direction of Scholar Rock i.e., Scholar Rock and Lineage Cell go up and down completely randomly.

Pair Corralation between Scholar Rock and Lineage Cell

Given the investment horizon of 90 days Scholar Rock Holding is expected to under-perform the Lineage Cell. But the stock apears to be less risky and, when comparing its historical volatility, Scholar Rock Holding is 1.76 times less risky than Lineage Cell. The stock trades about -0.13 of its potential returns per unit of risk. The Lineage Cell Therapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  50.00  in Lineage Cell Therapeutics on December 29, 2024 and sell it today you would lose (1.00) from holding Lineage Cell Therapeutics or give up 2.0% of portfolio value over 90 days.

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

Scholar Rock Holding  vs.  Lineage Cell Therapeutics

Scholar Rock Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scholar Rock Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Lineage Cell Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lineage Cell Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Lineage Cell may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Scholar Rock and Lineage Cell

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

The idea behind Scholar Rock Holding and Lineage Cell 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.