Correlation Between Design Therapeutics and Biogen

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

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

Diversification Opportunities for Design Therapeutics and Biogen

-0.52

Correlation Coefficient

Design Therapeutics  Biogen

Excellent diversification

The 3 months correlation between Design and Biogen is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Biogen Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biogen Inc and Design 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 Design Therapeutics are associated (or correlated) with Biogen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biogen Inc has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Biogen go up and down completely randomly.

Pair Corralation between Design Therapeutics and Biogen

Given the investment horizon of 90 days Design Therapeutics is expected to generate 3.41 times more return on investment than Biogen. However, Design Therapeutics is 3.41 times more volatile than Biogen Inc. It trades about 0.31 of its potential returns per unit of risk. Biogen Inc is currently generating about -0.45 per unit of risk. If you would invest  515.00  in Design Therapeutics on August 15, 2024 and sell it today you would earn a total of  176.00  from holding Design Therapeutics or generate 34.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.65%
Values	Daily Returns

Design Therapeutics  vs.  Biogen Inc

Design Therapeutics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Biogen Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biogen Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's forward indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Design Therapeutics and Biogen

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

The idea behind Design Therapeutics and Biogen Inc 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.