Correlation Between Design Therapeutics and Citius Pharmaceuticals

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

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

Diversification Opportunities for Design Therapeutics and Citius Pharmaceuticals

-0.31

Correlation Coefficient

Design Therapeutics  Citius Pharmaceuticals

Very good diversification

The 3 months correlation between Design and Citius is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Citius Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Citius Pharmaceuticals and Design 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 Design Therapeutics are associated (or correlated) with Citius Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Citius Pharmaceuticals has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Citius Pharmaceuticals go up and down completely randomly.

Pair Corralation between Design Therapeutics and Citius Pharmaceuticals

Given the investment horizon of 90 days Design Therapeutics is expected to generate 0.47 times more return on investment than Citius Pharmaceuticals. However, Design Therapeutics is 2.11 times less risky than Citius Pharmaceuticals. It trades about 0.12 of its potential returns per unit of risk. Citius Pharmaceuticals is currently generating about -0.21 per unit of risk. If you would invest  532.00  in Design Therapeutics on September 5, 2024 and sell it today you would earn a total of  67.00  from holding Design Therapeutics or generate 12.59% return on investment over 90 days.

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

Design Therapeutics  vs.  Citius Pharmaceuticals

Design Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Citius Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Citius Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Design Therapeutics and Citius Pharmaceuticals

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

The idea behind Design Therapeutics and Citius Pharmaceuticals 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.