Correlation Between Cytokinetics and Pliant Therapeutics

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

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

Diversification Opportunities for Cytokinetics and Pliant Therapeutics

0.11

Correlation Coefficient

Cytokinetics  Pliant Therapeutics

Average diversification

The 3 months correlation between Cytokinetics and Pliant is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Cytokinetics and Pliant Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pliant Therapeutics and Cytokinetics 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 Cytokinetics are associated (or correlated) with Pliant Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pliant Therapeutics has no effect on the direction of Cytokinetics i.e., Cytokinetics and Pliant Therapeutics go up and down completely randomly.

Pair Corralation between Cytokinetics and Pliant Therapeutics

Given the investment horizon of 90 days Cytokinetics is expected to generate 1.43 times less return on investment than Pliant Therapeutics. But when comparing it to its historical volatility, Cytokinetics is 1.38 times less risky than Pliant Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Pliant Therapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,288  in Pliant Therapeutics on August 26, 2024 and sell it today you would earn a total of  10.00  from holding Pliant Therapeutics or generate 0.78% return on investment over 90 days.

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

Cytokinetics  vs.  Pliant Therapeutics

Cytokinetics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cytokinetics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pliant Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pliant Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Pliant Therapeutics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cytokinetics and Pliant Therapeutics

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

The idea behind Cytokinetics and Pliant 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.

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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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.