Correlation Between Butterfly Network and Clarity Pharmaceuticals

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

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

Diversification Opportunities for Butterfly Network and Clarity Pharmaceuticals

-0.79

Correlation Coefficient

Butterfly Network  Clarity Pharmaceuticals

Pay attention - limited upside

The 3 months correlation between Butterfly and Clarity is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Butterfly Network and Clarity Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Clarity Pharmaceuticals and Butterfly Network 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 Butterfly Network are associated (or correlated) with Clarity Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Clarity Pharmaceuticals has no effect on the direction of Butterfly Network i.e., Butterfly Network and Clarity Pharmaceuticals go up and down completely randomly.

Pair Corralation between Butterfly Network and Clarity Pharmaceuticals

Given the investment horizon of 90 days Butterfly Network is expected to generate 1.03 times more return on investment than Clarity Pharmaceuticals. However, Butterfly Network is 1.03 times more volatile than Clarity Pharmaceuticals. It trades about 0.21 of its potential returns per unit of risk. Clarity Pharmaceuticals is currently generating about -0.12 per unit of risk. If you would invest  183.00  in Butterfly Network on September 15, 2024 and sell it today you would earn a total of  171.00  from holding Butterfly Network or generate 93.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Butterfly Network  vs.  Clarity Pharmaceuticals

Butterfly Network

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Butterfly Network are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak essential indicators, Butterfly Network showed solid returns over the last few months and may actually be approaching a breakup point.

Clarity Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Clarity Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Butterfly Network and Clarity Pharmaceuticals

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

The idea behind Butterfly Network and Clarity Pharmaceuticals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.