Correlation Between Veracyte and Cara Therapeutic

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

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

Diversification Opportunities for Veracyte and Cara Therapeutic

-0.26

Correlation Coefficient

Veracyte  Cara Therapeutic

Very good diversification

The 3 months correlation between Veracyte and Cara is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Veracyte and Cara Therapeutic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cara Therapeutic and Veracyte 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 Veracyte are associated (or correlated) with Cara Therapeutic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cara Therapeutic has no effect on the direction of Veracyte i.e., Veracyte and Cara Therapeutic go up and down completely randomly.

Pair Corralation between Veracyte and Cara Therapeutic

Given the investment horizon of 90 days Veracyte is expected to generate 0.36 times more return on investment than Cara Therapeutic. However, Veracyte is 2.78 times less risky than Cara Therapeutic. It trades about -0.15 of its potential returns per unit of risk. Cara Therapeutic is currently generating about -0.07 per unit of risk. If you would invest  2,353  in Veracyte on February 2, 2024 and sell it today you would lose (334.00) from holding Veracyte or give up 14.19% of portfolio value over 90 days.

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

Veracyte  vs.  Cara Therapeutic

Veracyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Veracyte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in June 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Cara Therapeutic

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cara Therapeutic are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Cara Therapeutic sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Veracyte and Cara Therapeutic

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

The idea behind Veracyte and Cara Therapeutic 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.