Correlation Between Century Therapeutics and ADC Therapeutics

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

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

Diversification Opportunities for Century Therapeutics and ADC Therapeutics

0.56

Correlation Coefficient

Century Therapeutics  ADC Therapeutics

Very weak diversification

The 3 months correlation between Century and ADC is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Century Therapeutics and ADC Therapeutics SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ADC Therapeutics and Century 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 Century Therapeutics are associated (or correlated) with ADC Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ADC Therapeutics has no effect on the direction of Century Therapeutics i.e., Century Therapeutics and ADC Therapeutics go up and down completely randomly.

Pair Corralation between Century Therapeutics and ADC Therapeutics

Given the investment horizon of 90 days Century Therapeutics is expected to generate 1.15 times more return on investment than ADC Therapeutics. However, Century Therapeutics is 1.15 times more volatile than ADC Therapeutics SA. It trades about 0.0 of its potential returns per unit of risk. ADC Therapeutics SA is currently generating about -0.06 per unit of risk. If you would invest  176.00  in Century Therapeutics on August 30, 2024 and sell it today you would lose (13.00) from holding Century Therapeutics or give up 7.39% of portfolio value over 90 days.

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

Century Therapeutics  vs.  ADC Therapeutics SA

Century Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Century Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

ADC Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ADC Therapeutics SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Century Therapeutics and ADC Therapeutics

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

The idea behind Century Therapeutics and ADC Therapeutics SA 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.