Correlation Between Living Cell and Relief Therapeutics

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

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

Diversification Opportunities for Living Cell and Relief Therapeutics

-0.63

Correlation Coefficient

Living Cell  Relief Therapeutics

Excellent diversification

The 3 months correlation between Living and Relief is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Living Cell Technologies and Relief Therapeutics Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relief Therapeutics and Living Cell 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 Living Cell Technologies are associated (or correlated) with Relief Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relief Therapeutics has no effect on the direction of Living Cell i.e., Living Cell and Relief Therapeutics go up and down completely randomly.

Pair Corralation between Living Cell and Relief Therapeutics

Assuming the 90 days horizon Living Cell Technologies is expected to generate 0.65 times more return on investment than Relief Therapeutics. However, Living Cell Technologies is 1.53 times less risky than Relief Therapeutics. It trades about 0.21 of its potential returns per unit of risk. Relief Therapeutics Holding is currently generating about -0.09 per unit of risk. If you would invest  0.43  in Living Cell Technologies on September 19, 2024 and sell it today you would earn a total of  0.08  from holding Living Cell Technologies or generate 18.6% return on investment over 90 days.

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

Living Cell Technologies  vs.  Relief Therapeutics Holding

Living Cell Technologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Living Cell Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's essential indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Relief Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Relief Therapeutics Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Relief Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Living Cell and Relief Therapeutics

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

The idea behind Living Cell Technologies and Relief Therapeutics Holding 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.