Correlation Between CERo Therapeutics and Viking Therapeutics

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

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

Diversification Opportunities for CERo Therapeutics and Viking Therapeutics

-0.61

Correlation Coefficient

CERo Therapeutics  Viking Therapeutics

Excellent diversification

The 3 months correlation between CERo and Viking is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding CERo Therapeutics Holdings and Viking Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Viking Therapeutics and CERo Therapeutics 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 CERo Therapeutics Holdings are associated (or correlated) with Viking Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Viking Therapeutics has no effect on the direction of CERo Therapeutics i.e., CERo Therapeutics and Viking Therapeutics go up and down completely randomly.

Pair Corralation between CERo Therapeutics and Viking Therapeutics

Assuming the 90 days horizon CERo Therapeutics Holdings is expected to generate 7.05 times more return on investment than Viking Therapeutics. However, CERo Therapeutics is 7.05 times more volatile than Viking Therapeutics. It trades about 0.13 of its potential returns per unit of risk. Viking Therapeutics is currently generating about -0.11 per unit of risk. If you would invest  1.20  in CERo Therapeutics Holdings on September 22, 2024 and sell it today you would lose (0.30) from holding CERo Therapeutics Holdings or give up 25.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	89.06%
Values	Daily Returns

CERo Therapeutics Holdings  vs.  Viking Therapeutics

CERo Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in CERo Therapeutics Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, CERo Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Viking Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Viking Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with CERo Therapeutics and Viking Therapeutics

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

The idea behind CERo Therapeutics Holdings and Viking 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.