Correlation Between Stoke Therapeutics and Dyne Therapeutics

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

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

Diversification Opportunities for Stoke Therapeutics and Dyne Therapeutics

0.33

Correlation Coefficient

Stoke Therapeutics  Dyne Therapeutics

Weak diversification

The 3 months correlation between Stoke and Dyne is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Stoke Therapeutics and Dyne Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dyne Therapeutics and Stoke 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 Stoke Therapeutics are associated (or correlated) with Dyne Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dyne Therapeutics has no effect on the direction of Stoke Therapeutics i.e., Stoke Therapeutics and Dyne Therapeutics go up and down completely randomly.

Pair Corralation between Stoke Therapeutics and Dyne Therapeutics

Given the investment horizon of 90 days Stoke Therapeutics is expected to under-perform the Dyne Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Stoke Therapeutics is 1.07 times less risky than Dyne Therapeutics. The stock trades about -0.07 of its potential returns per unit of risk. The Dyne Therapeutics is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  3,194  in Dyne Therapeutics on September 2, 2024 and sell it today you would lose (133.00) from holding Dyne Therapeutics or give up 4.16% of portfolio value over 90 days.

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

Stoke Therapeutics  vs.  Dyne Therapeutics

Stoke Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stoke Therapeutics 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 basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Dyne Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dyne Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Dyne Therapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Stoke Therapeutics and Dyne Therapeutics

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

The idea behind Stoke Therapeutics and Dyne 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 Global Correlations module to find global opportunities by holding instruments from different markets.