Correlation Between INTERNATIONAL and Design Therapeutics

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

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

Diversification Opportunities for INTERNATIONAL and Design Therapeutics

-0.6

Correlation Coefficient

INTERNATIONAL  Design Therapeutics

Excellent diversification

The 3 months correlation between INTERNATIONAL and Design is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding INTERNATIONAL FLAVORS FRAGRANC and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics and INTERNATIONAL 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 INTERNATIONAL FLAVORS FRAGRANCES are associated (or correlated) with Design Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design Therapeutics has no effect on the direction of INTERNATIONAL i.e., INTERNATIONAL and Design Therapeutics go up and down completely randomly.

Pair Corralation between INTERNATIONAL and Design Therapeutics

Assuming the 90 days trading horizon INTERNATIONAL FLAVORS FRAGRANCES is expected to generate 0.07 times more return on investment than Design Therapeutics. However, INTERNATIONAL FLAVORS FRAGRANCES is 14.79 times less risky than Design Therapeutics. It trades about -0.22 of its potential returns per unit of risk. Design Therapeutics is currently generating about -0.06 per unit of risk. If you would invest  9,883  in INTERNATIONAL FLAVORS FRAGRANCES on October 10, 2024 and sell it today you would lose (164.00) from holding INTERNATIONAL FLAVORS FRAGRANCES or give up 1.66% of portfolio value over 90 days.

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

INTERNATIONAL FLAVORS FRAGRANC  vs.  Design Therapeutics

INTERNATIONAL FLAVORS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INTERNATIONAL FLAVORS FRAGRANCES has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, INTERNATIONAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Design Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INTERNATIONAL and Design Therapeutics

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

The idea behind INTERNATIONAL FLAVORS FRAGRANCES and Design 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..