Correlation Between Aldel Financial and Centessa Pharmaceuticals

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

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

Diversification Opportunities for Aldel Financial and Centessa Pharmaceuticals

-0.03

Correlation Coefficient

Aldel Financial  Centessa Pharmaceuticals

Good diversification

The 3 months correlation between Aldel and Centessa is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals and Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Aldel Financial and Centessa Pharmaceuticals

Assuming the 90 days horizon Aldel Financial is expected to generate 18.97 times less return on investment than Centessa Pharmaceuticals. But when comparing it to its historical volatility, Aldel Financial II is 31.76 times less risky than Centessa Pharmaceuticals. It trades about 0.07 of its potential returns per unit of risk. Centessa Pharmaceuticals PLC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,585  in Centessa Pharmaceuticals PLC on September 19, 2024 and sell it today you would earn a total of  90.00  from holding Centessa Pharmaceuticals PLC or generate 5.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	63.49%
Values	Daily Returns

Aldel Financial II  vs.  Centessa Pharmaceuticals PLC

Aldel Financial II

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Centessa Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Centessa Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aldel Financial and Centessa Pharmaceuticals

The main advantage of trading using opposite Aldel Financial and Centessa Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial 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 Aldel Financial II 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.