Correlation Between Terns Pharmaceuticals and ProQR Therapeutics

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

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

Diversification Opportunities for Terns Pharmaceuticals and ProQR Therapeutics

-0.7

Correlation Coefficient

Terns Pharmaceuticals  ProQR Therapeutics

Excellent diversification

The 3 months correlation between Terns and ProQR is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Terns Pharmaceuticals and ProQR Therapeutics BV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProQR Therapeutics and Terns Pharmaceuticals 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 Terns Pharmaceuticals are associated (or correlated) with ProQR Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProQR Therapeutics has no effect on the direction of Terns Pharmaceuticals i.e., Terns Pharmaceuticals and ProQR Therapeutics go up and down completely randomly.

Pair Corralation between Terns Pharmaceuticals and ProQR Therapeutics

Given the investment horizon of 90 days Terns Pharmaceuticals is expected to under-perform the ProQR Therapeutics. In addition to that, Terns Pharmaceuticals is 1.11 times more volatile than ProQR Therapeutics BV. It trades about -0.08 of its total potential returns per unit of risk. ProQR Therapeutics BV is currently generating about 0.02 per unit of volatility. If you would invest  366.00  in ProQR Therapeutics BV on August 31, 2024 and sell it today you would earn a total of  1.00  from holding ProQR Therapeutics BV or generate 0.27% return on investment over 90 days.

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

Terns Pharmaceuticals  vs.  ProQR Therapeutics BV

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

ProQR Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ProQR Therapeutics BV are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, ProQR Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Terns Pharmaceuticals and ProQR Therapeutics

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

The idea behind Terns Pharmaceuticals and ProQR Therapeutics BV 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.