Correlation Between Relay TherapeuticsInc and Stoke Therapeutics
Can any of the company-specific risk be diversified away by investing in both Relay TherapeuticsInc and Stoke 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 Relay TherapeuticsInc and Stoke Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Relay TherapeuticsInc and Stoke Therapeutics, you can compare the effects of market volatilities on Relay TherapeuticsInc and Stoke 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 Relay TherapeuticsInc with a short position of Stoke Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Relay TherapeuticsInc and Stoke Therapeutics.
Diversification Opportunities for Relay TherapeuticsInc and Stoke Therapeutics
-0.67 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Relay and Stoke is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Relay TherapeuticsInc and Stoke Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoke Therapeutics and Relay TherapeuticsInc 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 Relay TherapeuticsInc are associated (or correlated) with Stoke Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoke Therapeutics has no effect on the direction of Relay TherapeuticsInc i.e., Relay TherapeuticsInc and Stoke Therapeutics go up and down completely randomly.
Pair Corralation between Relay TherapeuticsInc and Stoke Therapeutics
Given the investment horizon of 90 days Relay TherapeuticsInc is expected to under-perform the Stoke Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Relay TherapeuticsInc is 2.37 times less risky than Stoke Therapeutics. The stock trades about -0.15 of its potential returns per unit of risk. The Stoke Therapeutics is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 686.00 in Stoke Therapeutics on March 2, 2024 and sell it today you would earn a total of 776.00 from holding Stoke Therapeutics or generate 113.12% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Relay TherapeuticsInc vs. Stoke Therapeutics
Performance |
Timeline |
Relay TherapeuticsInc |
Stoke Therapeutics |
Relay TherapeuticsInc and Stoke Therapeutics Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Relay TherapeuticsInc and Stoke Therapeutics
The main advantage of trading using opposite Relay TherapeuticsInc and Stoke Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Relay TherapeuticsInc position performs unexpectedly, Stoke 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 Stoke Therapeutics will offset losses from the drop in Stoke Therapeutics' long position.The idea behind Relay TherapeuticsInc and Stoke 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.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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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