Correlation Between Ventyx Biosciences and Design Therapeutics

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

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

Diversification Opportunities for Ventyx Biosciences and Design Therapeutics

0.81

Correlation Coefficient

Ventyx Biosciences  Design Therapeutics

Very poor diversification

The 3 months correlation between Ventyx and Design is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Ventyx Biosciences and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics and Ventyx Biosciences 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 Ventyx Biosciences 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 Ventyx Biosciences i.e., Ventyx Biosciences and Design Therapeutics go up and down completely randomly.

Pair Corralation between Ventyx Biosciences and Design Therapeutics

Given the investment horizon of 90 days Ventyx Biosciences is expected to under-perform the Design Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Ventyx Biosciences is 1.02 times less risky than Design Therapeutics. The stock trades about -0.11 of its potential returns per unit of risk. The Design Therapeutics is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  628.00  in Design Therapeutics on December 2, 2024 and sell it today you would lose (142.00) from holding Design Therapeutics or give up 22.61% of portfolio value over 90 days.

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

Ventyx Biosciences  vs.  Design Therapeutics

Ventyx Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ventyx Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Design Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Design Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Ventyx Biosciences and Design Therapeutics

The main advantage of trading using opposite Ventyx Biosciences and Design Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ventyx Biosciences 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 Ventyx Biosciences 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.