Correlation Between Montauk Renewables and Centessa Pharmaceuticals

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

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

Diversification Opportunities for Montauk Renewables and Centessa Pharmaceuticals

-0.67

Correlation Coefficient

Montauk Renewables  Centessa Pharmaceuticals

Excellent diversification

The 3 months correlation between Montauk and Centessa is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals and Montauk Renewables 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 Montauk Renewables are associated (or correlated) with Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of Montauk Renewables i.e., Montauk Renewables and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Montauk Renewables and Centessa Pharmaceuticals

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the Centessa Pharmaceuticals. In addition to that, Montauk Renewables is 1.21 times more volatile than Centessa Pharmaceuticals PLC. It trades about -0.04 of its total potential returns per unit of risk. Centessa Pharmaceuticals PLC is currently generating about 0.02 per unit of volatility. If you would invest  1,628  in Centessa Pharmaceuticals PLC on September 17, 2024 and sell it today you would earn a total of  29.00  from holding Centessa Pharmaceuticals PLC or generate 1.78% return on investment over 90 days.

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

Montauk Renewables  vs.  Centessa Pharmaceuticals PLC

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Montauk Renewables has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Centessa Pharmaceuticals

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Centessa Pharmaceuticals is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Montauk Renewables and Centessa Pharmaceuticals

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

The idea behind Montauk Renewables and Centessa Pharmaceuticals PLC 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.