Correlation Between Bolt Biotherapeutics and Cara Therapeutic

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

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

Diversification Opportunities for Bolt Biotherapeutics and Cara Therapeutic

-0.02

Correlation Coefficient

Bolt Biotherapeutics  Cara Therapeutic

Good diversification

The 3 months correlation between Bolt and Cara is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Bolt Biotherapeutics and Cara Therapeutic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cara Therapeutic and Bolt Biotherapeutics 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 Bolt Biotherapeutics are associated (or correlated) with Cara Therapeutic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cara Therapeutic has no effect on the direction of Bolt Biotherapeutics i.e., Bolt Biotherapeutics and Cara Therapeutic go up and down completely randomly.

Pair Corralation between Bolt Biotherapeutics and Cara Therapeutic

Given the investment horizon of 90 days Bolt Biotherapeutics is expected to under-perform the Cara Therapeutic. But the stock apears to be less risky and, when comparing its historical volatility, Bolt Biotherapeutics is 1.72 times less risky than Cara Therapeutic. The stock trades about -0.04 of its potential returns per unit of risk. The Cara Therapeutic is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  62.00  in Cara Therapeutic on September 14, 2024 and sell it today you would lose (36.00) from holding Cara Therapeutic or give up 58.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

Bolt Biotherapeutics  vs.  Cara Therapeutic

Bolt Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bolt Biotherapeutics 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 essential indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cara Therapeutic

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cara Therapeutic has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cara Therapeutic is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bolt Biotherapeutics and Cara Therapeutic

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

The idea behind Bolt Biotherapeutics and Cara Therapeutic 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.