Correlation Between Ocean Biomedical and Caribou Biosciences

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

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

Diversification Opportunities for Ocean Biomedical and Caribou Biosciences

0.02

Correlation Coefficient

Ocean Biomedical  Caribou Biosciences

Significant diversification

The 3 months correlation between Ocean and Caribou is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Biomedical and Caribou Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribou Biosciences and Ocean Biomedical 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 Ocean Biomedical are associated (or correlated) with Caribou Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribou Biosciences has no effect on the direction of Ocean Biomedical i.e., Ocean Biomedical and Caribou Biosciences go up and down completely randomly.

Pair Corralation between Ocean Biomedical and Caribou Biosciences

Given the investment horizon of 90 days Ocean Biomedical is expected to under-perform the Caribou Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Ocean Biomedical is 1.31 times less risky than Caribou Biosciences. The stock trades about -0.22 of its potential returns per unit of risk. The Caribou Biosciences is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  197.00  in Caribou Biosciences on September 30, 2024 and sell it today you would lose (30.00) from holding Caribou Biosciences or give up 15.23% of portfolio value over 90 days.

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

Ocean Biomedical  vs.  Caribou Biosciences

Ocean Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Biomedical 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 technical and fundamental 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.

Caribou Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribou Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Ocean Biomedical and Caribou Biosciences

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

The idea behind Ocean Biomedical and Caribou Biosciences 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.