Correlation Between Cerevel Therapeutics and Replimune

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

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

Diversification Opportunities for Cerevel Therapeutics and Replimune

-0.5

Correlation Coefficient

Cerevel Therapeutics  Replimune

Very good diversification

The 3 months correlation between Cerevel and Replimune is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Cerevel Therapeutics Holdings and Replimune Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Replimune Group and Cerevel 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 Cerevel Therapeutics Holdings are associated (or correlated) with Replimune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Replimune Group has no effect on the direction of Cerevel Therapeutics i.e., Cerevel Therapeutics and Replimune go up and down completely randomly.

Pair Corralation between Cerevel Therapeutics and Replimune

Given the investment horizon of 90 days Cerevel Therapeutics Holdings is expected to generate 0.17 times more return on investment than Replimune. However, Cerevel Therapeutics Holdings is 5.74 times less risky than Replimune. It trades about 0.08 of its potential returns per unit of risk. Replimune Group is currently generating about -0.06 per unit of risk. If you would invest  4,170  in Cerevel Therapeutics Holdings on February 15, 2024 and sell it today you would earn a total of  39.00  from holding Cerevel Therapeutics Holdings or generate 0.94% return on investment over 90 days.

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

Cerevel Therapeutics Holdings  vs.  Replimune Group

Cerevel Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Replimune Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Replimune Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest conflicting performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Cerevel Therapeutics and Replimune

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

The idea behind Cerevel Therapeutics Holdings and Replimune Group 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.