Correlation Between Dupont De and Terns Pharmaceuticals

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

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

Diversification Opportunities for Dupont De and Terns Pharmaceuticals

-0.47

Correlation Coefficient

Dupont De  Terns Pharmaceuticals

Very good diversification

The 3 months correlation between Dupont and Terns is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals and Dupont De 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 Dupont De Nemours are associated (or correlated) with Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Dupont De i.e., Dupont De and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between Dupont De and Terns Pharmaceuticals

Allowing for the 90-day total investment horizon Dupont De Nemours is expected to generate 0.29 times more return on investment than Terns Pharmaceuticals. However, Dupont De Nemours is 3.41 times less risky than Terns Pharmaceuticals. It trades about 0.18 of its potential returns per unit of risk. Terns Pharmaceuticals is currently generating about -0.07 per unit of risk. If you would invest  6,922  in Dupont De Nemours on February 27, 2024 and sell it today you would earn a total of  1,190  from holding Dupont De Nemours or generate 17.19% return on investment over 90 days.

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

Dupont De Nemours  vs.  Terns Pharmaceuticals

Dupont De Nemours

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

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 uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Dupont De and Terns Pharmaceuticals

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

The idea behind Dupont De Nemours and Terns Pharmaceuticals 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.