Correlation Between Centessa Pharmaceuticals and Townsquare Media

Can any of the company-specific risk be diversified away by investing in both Centessa Pharmaceuticals and Townsquare Media 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 Townsquare Media 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 Townsquare Media, you can compare the effects of market volatilities on Centessa Pharmaceuticals and Townsquare Media 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 Townsquare Media. Check out your portfolio center. Please also check ongoing floating volatility patterns of Centessa Pharmaceuticals and Townsquare Media.

Diversification Opportunities for Centessa Pharmaceuticals and Townsquare Media

0.08

Correlation Coefficient

Centessa Pharmaceuticals  Townsquare Media

Significant diversification

The 3 months correlation between Centessa and Townsquare is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Centessa Pharmaceuticals PLC and Townsquare Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Townsquare Media 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 Townsquare Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Townsquare Media has no effect on the direction of Centessa Pharmaceuticals i.e., Centessa Pharmaceuticals and Townsquare Media go up and down completely randomly.

Pair Corralation between Centessa Pharmaceuticals and Townsquare Media

Given the investment horizon of 90 days Centessa Pharmaceuticals PLC is expected to generate 2.3 times more return on investment than Townsquare Media. However, Centessa Pharmaceuticals is 2.3 times more volatile than Townsquare Media. It trades about 0.11 of its potential returns per unit of risk. Townsquare Media is currently generating about 0.01 per unit of risk. If you would invest  1,350  in Centessa Pharmaceuticals PLC on September 3, 2024 and sell it today you would earn a total of  345.00  from holding Centessa Pharmaceuticals PLC or generate 25.56% return on investment over 90 days.

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

Centessa Pharmaceuticals PLC  vs.  Townsquare Media

Centessa Pharmaceuticals

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 8 (%) 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.

Townsquare Media

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Townsquare Media are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Townsquare Media is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Centessa Pharmaceuticals and Townsquare Media

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

The idea behind Centessa Pharmaceuticals PLC and Townsquare Media 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.