Correlation Between Cytokinetics and Veracyte

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

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

Diversification Opportunities for Cytokinetics and Veracyte

-0.33

Correlation Coefficient

Cytokinetics  Veracyte

Very good diversification

The 3 months correlation between Cytokinetics and Veracyte is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cytokinetics and Veracyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veracyte and Cytokinetics 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 Cytokinetics are associated (or correlated) with Veracyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veracyte has no effect on the direction of Cytokinetics i.e., Cytokinetics and Veracyte go up and down completely randomly.

Pair Corralation between Cytokinetics and Veracyte

Given the investment horizon of 90 days Cytokinetics is expected to under-perform the Veracyte. But the stock apears to be less risky and, when comparing its historical volatility, Cytokinetics is 1.11 times less risky than Veracyte. The stock trades about -0.02 of its potential returns per unit of risk. The Veracyte is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  3,029  in Veracyte on August 31, 2024 and sell it today you would earn a total of  1,260  from holding Veracyte or generate 41.6% return on investment over 90 days.

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

Cytokinetics  vs.  Veracyte

Cytokinetics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cytokinetics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cytokinetics is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Veracyte

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Veracyte are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Veracyte unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cytokinetics and Veracyte

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

The idea behind Cytokinetics and Veracyte 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.