Correlation Between Zoetis and Cidara Therapeutics

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

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

Diversification Opportunities for Zoetis and Cidara Therapeutics

-0.5

Correlation Coefficient

Zoetis  Cidara Therapeutics

Very good diversification

The 3 months correlation between Zoetis and Cidara is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Zoetis Inc and Cidara Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cidara Therapeutics and Zoetis 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 Zoetis Inc are associated (or correlated) with Cidara Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cidara Therapeutics has no effect on the direction of Zoetis i.e., Zoetis and Cidara Therapeutics go up and down completely randomly.

Pair Corralation between Zoetis and Cidara Therapeutics

Considering the 90-day investment horizon Zoetis Inc is expected to generate 0.36 times more return on investment than Cidara Therapeutics. However, Zoetis Inc is 2.75 times less risky than Cidara Therapeutics. It trades about 0.03 of its potential returns per unit of risk. Cidara Therapeutics is currently generating about -0.03 per unit of risk. If you would invest  16,175  in Zoetis Inc on December 28, 2024 and sell it today you would earn a total of  327.00  from holding Zoetis Inc or generate 2.02% return on investment over 90 days.

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

Zoetis Inc  vs.  Cidara Therapeutics

Zoetis Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Zoetis Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Zoetis is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Cidara Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cidara 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 strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Zoetis and Cidara Therapeutics

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

The idea behind Zoetis Inc and Cidara 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.