Correlation Between C4 Therapeutics and NGM Biopharmaceutica

Can any of the company-specific risk be diversified away by investing in both C4 Therapeutics and NGM Biopharmaceutica 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 C4 Therapeutics and NGM Biopharmaceutica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between C4 Therapeutics and NGM Biopharmaceuticals, you can compare the effects of market volatilities on C4 Therapeutics and NGM Biopharmaceutica 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 C4 Therapeutics with a short position of NGM Biopharmaceutica. Check out your portfolio center. Please also check ongoing floating volatility patterns of C4 Therapeutics and NGM Biopharmaceutica.

Diversification Opportunities for C4 Therapeutics and NGM Biopharmaceutica

-0.53

Correlation Coefficient

C4 Therapeutics  NGM Biopharmaceutica

Excellent diversification

The 3 months correlation between CCCC and NGM is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding C4 Therapeutics and NGM Biopharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGM Biopharmaceuticals and C4 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 C4 Therapeutics are associated (or correlated) with NGM Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGM Biopharmaceuticals has no effect on the direction of C4 Therapeutics i.e., C4 Therapeutics and NGM Biopharmaceutica go up and down completely randomly.

Pair Corralation between C4 Therapeutics and NGM Biopharmaceutica

Given the investment horizon of 90 days C4 Therapeutics is expected to generate 4.04 times more return on investment than NGM Biopharmaceutica. However, C4 Therapeutics is 4.04 times more volatile than NGM Biopharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. NGM Biopharmaceuticals is currently generating about -0.36 per unit of risk. If you would invest  344.00  in C4 Therapeutics on June 9, 2024 and sell it today you would earn a total of  196.00  from holding C4 Therapeutics or generate 56.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	2.41%
Values	Daily Returns

C4 Therapeutics  vs.  NGM Biopharmaceuticals

C4 Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in C4 Therapeutics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, C4 Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

NGM Biopharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NGM Biopharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, NGM Biopharmaceutica is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with C4 Therapeutics and NGM Biopharmaceutica

The main advantage of trading using opposite C4 Therapeutics and NGM Biopharmaceutica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if C4 Therapeutics position performs unexpectedly, NGM Biopharmaceutica 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 NGM Biopharmaceutica will offset losses from the drop in NGM Biopharmaceutica's long position.

The idea behind C4 Therapeutics and NGM Biopharmaceuticals 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.