Correlation Between Rallybio Corp and Century Therapeutics

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

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

Diversification Opportunities for Rallybio Corp and Century Therapeutics

0.7

Correlation Coefficient

Rallybio Corp  Century Therapeutics

Poor diversification

The 3 months correlation between Rallybio and Century is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Rallybio Corp and Century Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Therapeutics and Rallybio Corp 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 Rallybio Corp are associated (or correlated) with Century Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Therapeutics has no effect on the direction of Rallybio Corp i.e., Rallybio Corp and Century Therapeutics go up and down completely randomly.

Pair Corralation between Rallybio Corp and Century Therapeutics

Given the investment horizon of 90 days Rallybio Corp is expected to generate 0.56 times more return on investment than Century Therapeutics. However, Rallybio Corp is 1.78 times less risky than Century Therapeutics. It trades about 0.06 of its potential returns per unit of risk. Century Therapeutics is currently generating about 0.0 per unit of risk. If you would invest  110.00  in Rallybio Corp on September 12, 2024 and sell it today you would earn a total of  9.00  from holding Rallybio Corp or generate 8.18% return on investment over 90 days.

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

Rallybio Corp  vs.  Century Therapeutics

Rallybio Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rallybio Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Rallybio Corp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Century Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Century Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Rallybio Corp and Century Therapeutics

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

The idea behind Rallybio Corp and Century 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.