Correlation Between Centessa Pharmaceuticals and Opthea

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

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

Diversification Opportunities for Centessa Pharmaceuticals and Opthea

-0.27

Correlation Coefficient

Centessa Pharmaceuticals  Opthea

Very good diversification

The 3 months correlation between Centessa and Opthea is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and Opthea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opthea and Centessa Pharmaceuticals 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 Centessa Pharmaceuticals PLC are associated (or correlated) with Opthea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opthea has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and Opthea go up and down completely randomly.

Pair Corralation between Centessa Pharmaceuticals and Opthea

Given the investment horizon of 90 days Centessa Pharmaceuticals is expected to generate 1.06 times less return on investment than Opthea. But when comparing it to its historical volatility, Centessa Pharmaceuticals PLC is 1.2 times less risky than Opthea. It trades about 0.07 of its potential returns per unit of risk. Opthea is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  315.00  in Opthea on September 12, 2024 and sell it today you would earn a total of  34.00  from holding Opthea or generate 10.79% return on investment over 90 days.

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

Centessa Pharmaceuticals PLC  vs.  Opthea

Centessa Pharmaceuticals

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Centessa Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Opthea

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Opthea unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Centessa Pharmaceuticals and Opthea

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

The idea behind Centessa Pharmaceuticals PLC and Opthea 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.