Correlation Between Vera Therapeutics and Alx Oncology

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

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

Diversification Opportunities for Vera Therapeutics and Alx Oncology

-0.62

Correlation Coefficient

Vera Therapeutics  Alx Oncology

Excellent diversification

The 3 months correlation between Vera and Alx is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Vera Therapeutics and Alx Oncology Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alx Oncology Holdings and Vera 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 Vera Therapeutics are associated (or correlated) with Alx Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alx Oncology Holdings has no effect on the direction of Vera Therapeutics i.e., Vera Therapeutics and Alx Oncology go up and down completely randomly.

Pair Corralation between Vera Therapeutics and Alx Oncology

Given the investment horizon of 90 days Vera Therapeutics is expected to generate 0.85 times more return on investment than Alx Oncology. However, Vera Therapeutics is 1.17 times less risky than Alx Oncology. It trades about 0.13 of its potential returns per unit of risk. Alx Oncology Holdings is currently generating about -0.11 per unit of risk. If you would invest  3,836  in Vera Therapeutics on September 3, 2024 and sell it today you would earn a total of  1,139  from holding Vera Therapeutics or generate 29.69% return on investment over 90 days.

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

Vera Therapeutics  vs.  Alx Oncology Holdings

Vera Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vera Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Vera Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Alx Oncology Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alx Oncology Holdings 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.

Pair Trading with Vera Therapeutics and Alx Oncology

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

The idea behind Vera Therapeutics and Alx Oncology Holdings 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.

Check out your portfolio center.

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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.