Correlation Between CytomX Therapeutics and Wave Life

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

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

Diversification Opportunities for CytomX Therapeutics and Wave Life

-0.74

Correlation Coefficient

CytomX Therapeutics  Wave Life

Pay attention - limited upside

The 3 months correlation between CytomX and Wave is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding CytomX Therapeutics and Wave Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wave Life Sciences and CytomX 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 CytomX Therapeutics are associated (or correlated) with Wave Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wave Life Sciences has no effect on the direction of CytomX Therapeutics i.e., CytomX Therapeutics and Wave Life go up and down completely randomly.

Pair Corralation between CytomX Therapeutics and Wave Life

Given the investment horizon of 90 days CytomX Therapeutics is expected to under-perform the Wave Life. But the stock apears to be less risky and, when comparing its historical volatility, CytomX Therapeutics is 3.36 times less risky than Wave Life. The stock trades about -0.02 of its potential returns per unit of risk. The Wave Life Sciences is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  555.00  in Wave Life Sciences on August 31, 2024 and sell it today you would earn a total of  944.00  from holding Wave Life Sciences or generate 170.09% return on investment over 90 days.

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

CytomX Therapeutics  vs.  Wave Life Sciences

CytomX Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CytomX Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, CytomX Therapeutics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Wave Life Sciences

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Wave Life Sciences are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Wave Life exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CytomX Therapeutics and Wave Life

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

The idea behind CytomX Therapeutics and Wave Life Sciences 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.