Correlation Between Cara Therapeutic and Zynerba Pharmaceuticals

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

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

Diversification Opportunities for Cara Therapeutic and Zynerba Pharmaceuticals

-0.03

Correlation Coefficient

Cara Therapeutic  Zynerba Pharmaceuticals

Good diversification

The 3 months correlation between Cara and Zynerba is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Cara Therapeutic and Zynerba Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zynerba Pharmaceuticals 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 Zynerba Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zynerba Pharmaceuticals has no effect on the direction of Cara Therapeutic i.e., Cara Therapeutic and Zynerba Pharmaceuticals go up and down completely randomly.

Pair Corralation between Cara Therapeutic and Zynerba Pharmaceuticals

If you would invest  36.00  in Zynerba Pharmaceuticals on September 14, 2024 and sell it today you would earn a total of  0.00  from holding Zynerba Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Cara Therapeutic  vs.  Zynerba Pharmaceuticals

Cara Therapeutic

Risk-Adjusted Performance

0 of 100

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.

Zynerba Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Zynerba Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Zynerba Pharmaceuticals is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cara Therapeutic and Zynerba Pharmaceuticals

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

The idea behind Cara Therapeutic and Zynerba 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.