Correlation Between Cara Therapeutic and Senti Biosciences

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

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

Diversification Opportunities for Cara Therapeutic and Senti Biosciences

-0.15

Correlation Coefficient

Cara Therapeutic  Senti Biosciences

Good diversification

The 3 months correlation between Cara and Senti is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Cara Therapeutic and Senti Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Senti Biosciences and Cara Therapeutic 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 Cara Therapeutic are associated (or correlated) with Senti Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Senti Biosciences has no effect on the direction of Cara Therapeutic i.e., Cara Therapeutic and Senti Biosciences go up and down completely randomly.

Pair Corralation between Cara Therapeutic and Senti Biosciences

Given the investment horizon of 90 days Cara Therapeutic is expected to under-perform the Senti Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Cara Therapeutic is 2.8 times less risky than Senti Biosciences. The stock trades about -0.08 of its potential returns per unit of risk. The Senti Biosciences is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,340  in Senti Biosciences on September 13, 2024 and sell it today you would lose (781.00) from holding Senti Biosciences or give up 58.28% of portfolio value over 90 days.

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

Cara Therapeutic  vs.  Senti Biosciences

Cara Therapeutic

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cara Therapeutic are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Senti Biosciences

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Senti Biosciences are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating basic indicators, Senti Biosciences demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cara Therapeutic and Senti Biosciences

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

The idea behind Cara Therapeutic and Senti Biosciences 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.