Correlation Between Lyra Therapeutics and Denali Therapeutics

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

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

Diversification Opportunities for Lyra Therapeutics and Denali Therapeutics

0.39

Correlation Coefficient

Lyra Therapeutics  Denali Therapeutics

Weak diversification

The 3 months correlation between Lyra and Denali is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lyra Therapeutics and Denali Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Denali Therapeutics and Lyra 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 Lyra Therapeutics are associated (or correlated) with Denali Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Denali Therapeutics has no effect on the direction of Lyra Therapeutics i.e., Lyra Therapeutics and Denali Therapeutics go up and down completely randomly.

Pair Corralation between Lyra Therapeutics and Denali Therapeutics

Given the investment horizon of 90 days Lyra Therapeutics is expected to under-perform the Denali Therapeutics. In addition to that, Lyra Therapeutics is 1.93 times more volatile than Denali Therapeutics. It trades about -0.04 of its total potential returns per unit of risk. Denali Therapeutics is currently generating about 0.03 per unit of volatility. If you would invest  2,516  in Denali Therapeutics on September 4, 2024 and sell it today you would earn a total of  47.00  from holding Denali Therapeutics or generate 1.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Lyra Therapeutics  vs.  Denali Therapeutics

Lyra Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyra Therapeutics 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Denali Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Denali Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong essential indicators, Denali Therapeutics is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Lyra Therapeutics and Denali Therapeutics

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

The idea behind Lyra Therapeutics and Denali 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.