Correlation Between Caribou Biosciences and Verastem

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

By analyzing existing cross correlation between Caribou Biosciences and Verastem, you can compare the effects of market volatilities on Caribou Biosciences and Verastem 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 Verastem. Check out your portfolio center. Please also check ongoing floating volatility patterns of Caribou Biosciences and Verastem.

Diversification Opportunities for Caribou Biosciences and Verastem

0.32

Correlation Coefficient

Caribou Biosciences  Verastem

Weak diversification

The 3 months correlation between Caribou and Verastem is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Caribou Biosciences and Verastem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verastem 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 Verastem. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verastem has no effect on the direction of Caribou Biosciences i.e., Caribou Biosciences and Verastem go up and down completely randomly.

Pair Corralation between Caribou Biosciences and Verastem

Given the investment horizon of 90 days Caribou Biosciences is expected to generate 1.61 times less return on investment than Verastem. But when comparing it to its historical volatility, Caribou Biosciences is 1.12 times less risky than Verastem. It trades about 0.03 of its potential returns per unit of risk. Verastem is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  325.00  in Verastem on September 29, 2024 and sell it today you would earn a total of  46.00  from holding Verastem or generate 14.15% return on investment over 90 days.

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

Caribou Biosciences  vs.  Verastem

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 latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Verastem

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Verastem are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Verastem displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribou Biosciences and Verastem

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

The idea behind Caribou Biosciences and Verastem 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.

Check out your portfolio center.

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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.