Correlation Between Century Therapeutics and Entrada Therapeutics

Can any of the company-specific risk be diversified away by investing in both Century Therapeutics and Entrada 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 Entrada 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 Entrada Therapeutics, you can compare the effects of market volatilities on Century Therapeutics and Entrada 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 Entrada Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Century Therapeutics and Entrada Therapeutics.

Diversification Opportunities for Century Therapeutics and Entrada Therapeutics

-0.37

Correlation Coefficient

Century Therapeutics  Entrada Therapeutics

Very good diversification

The 3 months correlation between Century and Entrada is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Century Therapeutics and Entrada Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entrada 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 Entrada Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entrada Therapeutics has no effect on the direction of Century Therapeutics i.e., Century Therapeutics and Entrada Therapeutics go up and down completely randomly.

Pair Corralation between Century Therapeutics and Entrada Therapeutics

Given the investment horizon of 90 days Century Therapeutics is expected to generate 2.24 times less return on investment than Entrada Therapeutics. In addition to that, Century Therapeutics is 1.8 times more volatile than Entrada Therapeutics. It trades about 0.04 of its total potential returns per unit of risk. Entrada Therapeutics is currently generating about 0.17 per unit of volatility. If you would invest  1,540  in Entrada Therapeutics on September 4, 2024 and sell it today you would earn a total of  492.00  from holding Entrada Therapeutics or generate 31.95% return on investment over 90 days.

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

Century Therapeutics  vs.  Entrada Therapeutics

Century Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Century Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Entrada Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Entrada Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Entrada Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Century Therapeutics and Entrada Therapeutics

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

The idea behind Century Therapeutics and Entrada 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.

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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.