Correlation Between Caribou Biosciences and Lumos Pharma

Can any of the company-specific risk be diversified away by investing in both Caribou 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 Caribou 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 Caribou Biosciences and Lumos Pharma, you can compare the effects of market volatilities on Caribou 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 Caribou Biosciences with a short position of Lumos Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribou Biosciences and Lumos Pharma.

Diversification Opportunities for Caribou Biosciences and Lumos Pharma

0.47

Correlation Coefficient

Caribou Biosciences  Lumos Pharma

Very weak diversification

The 3 months correlation between Caribou and Lumos is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Caribou Biosciences and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma and Caribou 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 Caribou 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 Caribou Biosciences i.e., Caribou Biosciences and Lumos Pharma go up and down completely randomly.

Pair Corralation between Caribou Biosciences and Lumos Pharma

Given the investment horizon of 90 days Caribou Biosciences is expected to generate 8.91 times less return on investment than Lumos Pharma. In addition to that, Caribou Biosciences is 1.56 times more volatile than Lumos Pharma. It trades about 0.01 of its total potential returns per unit of risk. Lumos Pharma is currently generating about 0.1 per unit of volatility. If you would invest  376.00  in Lumos Pharma on September 23, 2024 and sell it today you would earn a total of  58.00  from holding Lumos Pharma or generate 15.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	89.23%
Values	Daily Returns

Caribou Biosciences  vs.  Lumos Pharma

Caribou Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribou Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Caribou Biosciences is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Lumos Pharma

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Lumos Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very unsteady primary indicators, Lumos Pharma displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribou Biosciences and Lumos Pharma

The main advantage of trading using opposite Caribou Biosciences and Lumos Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caribou 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 Caribou 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.