Correlation Between Vericel Corp and Larimar Therapeutics

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

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

Diversification Opportunities for Vericel Corp and Larimar Therapeutics

-0.37

Correlation Coefficient

Vericel Corp  Larimar Therapeutics

Very good diversification

The 3 months correlation between Vericel and Larimar is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Vericel Corp Ord and Larimar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larimar Therapeutics and Vericel Corp 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 Vericel Corp Ord are associated (or correlated) with Larimar Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larimar Therapeutics has no effect on the direction of Vericel Corp i.e., Vericel Corp and Larimar Therapeutics go up and down completely randomly.

Pair Corralation between Vericel Corp and Larimar Therapeutics

Given the investment horizon of 90 days Vericel Corp Ord is expected to generate 0.27 times more return on investment than Larimar Therapeutics. However, Vericel Corp Ord is 3.68 times less risky than Larimar Therapeutics. It trades about 0.0 of its potential returns per unit of risk. Larimar Therapeutics is currently generating about -0.29 per unit of risk. If you would invest  5,671  in Vericel Corp Ord on September 22, 2024 and sell it today you would lose (21.00) from holding Vericel Corp Ord or give up 0.37% of portfolio value over 90 days.

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

Vericel Corp Ord  vs.  Larimar Therapeutics

Vericel Corp Ord

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vericel Corp Ord are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Vericel Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Larimar Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Larimar Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Vericel Corp and Larimar Therapeutics

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

The idea behind Vericel Corp Ord and Larimar 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.