Correlation Between RAPT Therapeutics and Third Harmonic

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

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

Diversification Opportunities for RAPT Therapeutics and Third Harmonic

0.66

Correlation Coefficient

RAPT Therapeutics  Third Harmonic

Poor diversification

The 3 months correlation between RAPT and Third is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding RAPT Therapeutics and Third Harmonic Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Harmonic Bio and RAPT 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 RAPT Therapeutics are associated (or correlated) with Third Harmonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Harmonic Bio has no effect on the direction of RAPT Therapeutics i.e., RAPT Therapeutics and Third Harmonic go up and down completely randomly.

Pair Corralation between RAPT Therapeutics and Third Harmonic

Given the investment horizon of 90 days RAPT Therapeutics is expected to generate 4.43 times more return on investment than Third Harmonic. However, RAPT Therapeutics is 4.43 times more volatile than Third Harmonic Bio. It trades about 0.08 of its potential returns per unit of risk. Third Harmonic Bio is currently generating about -0.06 per unit of risk. If you would invest  176.00  in RAPT Therapeutics on September 24, 2024 and sell it today you would earn a total of  29.50  from holding RAPT Therapeutics or generate 16.76% return on investment over 90 days.

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

RAPT Therapeutics  vs.  Third Harmonic Bio

RAPT Therapeutics

Risk-Adjusted Performance

5 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RAPT Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, RAPT Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Third Harmonic Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Third Harmonic Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with RAPT Therapeutics and Third Harmonic

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

The idea behind RAPT Therapeutics and Third Harmonic Bio 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.