Correlation Between Cabaletta Bio and Protara Therapeutics

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

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

Diversification Opportunities for Cabaletta Bio and Protara Therapeutics

-0.45

Correlation Coefficient

Cabaletta Bio  Protara Therapeutics

Very good diversification

The 3 months correlation between Cabaletta and Protara is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Cabaletta Bio and Protara Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Protara Therapeutics and Cabaletta Bio 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 Cabaletta Bio are associated (or correlated) with Protara Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Protara Therapeutics has no effect on the direction of Cabaletta Bio i.e., Cabaletta Bio and Protara Therapeutics go up and down completely randomly.

Pair Corralation between Cabaletta Bio and Protara Therapeutics

Given the investment horizon of 90 days Cabaletta Bio is expected to under-perform the Protara Therapeutics. In addition to that, Cabaletta Bio is 1.94 times more volatile than Protara Therapeutics. It trades about -0.01 of its total potential returns per unit of risk. Protara Therapeutics is currently generating about 0.18 per unit of volatility. If you would invest  192.00  in Protara Therapeutics on September 3, 2024 and sell it today you would earn a total of  109.00  from holding Protara Therapeutics or generate 56.77% return on investment over 90 days.

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

Cabaletta Bio  vs.  Protara Therapeutics

Cabaletta Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabaletta Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Protara Therapeutics

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Protara Therapeutics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Protara Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cabaletta Bio and Protara Therapeutics

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

The idea behind Cabaletta Bio and Protara 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.