Correlation Between Rani Therapeutics and Aura Biosciences

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

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

Diversification Opportunities for Rani Therapeutics and Aura Biosciences

0.65

Correlation Coefficient

Rani Therapeutics  Aura Biosciences

Poor diversification

The 3 months correlation between Rani and Aura is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Rani Therapeutics Holdings and Aura Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Biosciences and Rani 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 Rani Therapeutics Holdings are associated (or correlated) with Aura Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Biosciences has no effect on the direction of Rani Therapeutics i.e., Rani Therapeutics and Aura Biosciences go up and down completely randomly.

Pair Corralation between Rani Therapeutics and Aura Biosciences

Given the investment horizon of 90 days Rani Therapeutics Holdings is expected to under-perform the Aura Biosciences. In addition to that, Rani Therapeutics is 2.73 times more volatile than Aura Biosciences. It trades about -0.03 of its total potential returns per unit of risk. Aura Biosciences is currently generating about -0.03 per unit of volatility. If you would invest  955.00  in Aura Biosciences on September 18, 2024 and sell it today you would lose (89.00) from holding Aura Biosciences or give up 9.32% of portfolio value over 90 days.

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

Rani Therapeutics Holdings  vs.  Aura Biosciences

Rani Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rani Therapeutics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Aura Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aura Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Aura Biosciences is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Rani Therapeutics and Aura Biosciences

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

The idea behind Rani Therapeutics Holdings and Aura 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.