Correlation Between Terns Pharmaceuticals and Shattuck Labs

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

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

Diversification Opportunities for Terns Pharmaceuticals and Shattuck Labs

0.87

Correlation Coefficient

Terns Pharmaceuticals  Shattuck Labs

Very poor diversification

The 3 months correlation between Terns and Shattuck is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Terns Pharmaceuticals and Shattuck Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shattuck Labs and Terns Pharmaceuticals 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 Terns Pharmaceuticals are associated (or correlated) with Shattuck Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shattuck Labs has no effect on the direction of Terns Pharmaceuticals i.e., Terns Pharmaceuticals and Shattuck Labs go up and down completely randomly.

Pair Corralation between Terns Pharmaceuticals and Shattuck Labs

Given the investment horizon of 90 days Terns Pharmaceuticals is expected to generate 2.06 times less return on investment than Shattuck Labs. But when comparing it to its historical volatility, Terns Pharmaceuticals is 1.63 times less risky than Shattuck Labs. It trades about 0.01 of its potential returns per unit of risk. Shattuck Labs is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  241.00  in Shattuck Labs on September 14, 2024 and sell it today you would lose (121.00) from holding Shattuck Labs or give up 50.21% of portfolio value over 90 days.

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

Terns Pharmaceuticals  vs.  Shattuck Labs

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Shattuck Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shattuck Labs 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 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.

Pair Trading with Terns Pharmaceuticals and Shattuck Labs

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

The idea behind Terns Pharmaceuticals and Shattuck Labs 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.