Correlation Between Tempest Therapeutics and Centessa Pharmaceuticals

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

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

Diversification Opportunities for Tempest Therapeutics and Centessa Pharmaceuticals

-0.05

Correlation Coefficient

Tempest Therapeutics  Centessa Pharmaceuticals

Good diversification

The 3 months correlation between Tempest and Centessa is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Tempest Therapeutics and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals and Tempest Therapeutics 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 Tempest Therapeutics are associated (or correlated) with Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of Tempest Therapeutics i.e., Tempest Therapeutics and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Tempest Therapeutics and Centessa Pharmaceuticals

Given the investment horizon of 90 days Tempest Therapeutics is expected to under-perform the Centessa Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Tempest Therapeutics is 1.26 times less risky than Centessa Pharmaceuticals. The stock trades about -0.22 of its potential returns per unit of risk. The Centessa Pharmaceuticals PLC is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1,642  in Centessa Pharmaceuticals PLC on November 28, 2024 and sell it today you would lose (51.00) from holding Centessa Pharmaceuticals PLC or give up 3.11% of portfolio value over 90 days.

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

Tempest Therapeutics  vs.  Centessa Pharmaceuticals PLC

Tempest Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tempest Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Centessa Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Centessa Pharmaceuticals PLC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Tempest Therapeutics and Centessa Pharmaceuticals

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

The idea behind Tempest Therapeutics and Centessa Pharmaceuticals PLC 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.