Correlation Between Catalyst Biosciences and Lumos Pharma

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

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

Diversification Opportunities for Catalyst Biosciences and Lumos Pharma

0.6

Correlation Coefficient

Catalyst Biosciences  Lumos Pharma

Poor diversification

The 3 months correlation between Catalyst and Lumos is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Catalyst Biosciences and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma and Catalyst Biosciences 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 Catalyst Biosciences are associated (or correlated) with Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of Catalyst Biosciences i.e., Catalyst Biosciences and Lumos Pharma go up and down completely randomly.

Pair Corralation between Catalyst Biosciences and Lumos Pharma

If you would invest  387.00  in Lumos Pharma on September 15, 2024 and sell it today you would earn a total of  47.00  from holding Lumos Pharma or generate 12.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Catalyst Biosciences  vs.  Lumos Pharma

Catalyst Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Catalyst Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Catalyst Biosciences is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Lumos Pharma

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lumos Pharma are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent primary indicators, Lumos Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Catalyst Biosciences and Lumos Pharma

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

The idea behind Catalyst Biosciences and Lumos Pharma 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.