Correlation Between Alpha Tau and Capricor Therapeutics

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

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

Diversification Opportunities for Alpha Tau and Capricor Therapeutics

-0.44

Correlation Coefficient

Alpha Tau  Capricor Therapeutics

Very good diversification

The 3 months correlation between Alpha and Capricor is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Tau Medical and Capricor Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricor Therapeutics and Alpha Tau 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 Alpha Tau Medical are associated (or correlated) with Capricor Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricor Therapeutics has no effect on the direction of Alpha Tau i.e., Alpha Tau and Capricor Therapeutics go up and down completely randomly.

Pair Corralation between Alpha Tau and Capricor Therapeutics

Given the investment horizon of 90 days Alpha Tau is expected to generate 1.85 times less return on investment than Capricor Therapeutics. But when comparing it to its historical volatility, Alpha Tau Medical is 3.36 times less risky than Capricor Therapeutics. It trades about 0.17 of its potential returns per unit of risk. Capricor Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,034  in Capricor Therapeutics on September 25, 2024 and sell it today you would earn a total of  369.00  from holding Capricor Therapeutics or generate 35.69% return on investment over 90 days.

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

Alpha Tau Medical  vs.  Capricor Therapeutics

Alpha Tau Medical

Risk-Adjusted Performance

13 of 100

Good

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

Capricor Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capricor Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Capricor Therapeutics reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpha Tau and Capricor Therapeutics

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

The idea behind Alpha Tau Medical and Capricor Therapeutics 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.