Correlation Between Lantern Pharma and Precision BioSciences

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

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

Diversification Opportunities for Lantern Pharma and Precision BioSciences

0.72

Correlation Coefficient

Lantern Pharma  Precision BioSciences

Poor diversification

The 3 months correlation between Lantern and Precision is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Lantern Pharma and Precision BioSciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision BioSciences and Lantern Pharma 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 Lantern Pharma are associated (or correlated) with Precision BioSciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision BioSciences has no effect on the direction of Lantern Pharma i.e., Lantern Pharma and Precision BioSciences go up and down completely randomly.

Pair Corralation between Lantern Pharma and Precision BioSciences

Given the investment horizon of 90 days Lantern Pharma is expected to generate 1.14 times more return on investment than Precision BioSciences. However, Lantern Pharma is 1.14 times more volatile than Precision BioSciences. It trades about 0.01 of its potential returns per unit of risk. Precision BioSciences is currently generating about -0.04 per unit of risk. If you would invest  515.00  in Lantern Pharma on August 31, 2024 and sell it today you would lose (204.00) from holding Lantern Pharma or give up 39.61% of portfolio value over 90 days.

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

Lantern Pharma  vs.  Precision BioSciences

Lantern Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lantern Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Precision BioSciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Precision BioSciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward 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.

Pair Trading with Lantern Pharma and Precision BioSciences

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

The idea behind Lantern Pharma and Precision BioSciences 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.