Correlation Between Reata Pharmaceuticals and Stoke Therapeutics

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

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

Diversification Opportunities for Reata Pharmaceuticals and Stoke Therapeutics

0.07

Correlation Coefficient

Reata Pharmaceuticals  Stoke Therapeutics

Significant diversification

The 3 months correlation between Reata and Stoke is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Reata Pharmaceuticals and Stoke Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stoke Therapeutics and Reata Pharmaceuticals 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 Reata Pharmaceuticals are associated (or correlated) with Stoke Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stoke Therapeutics has no effect on the direction of Reata Pharmaceuticals i.e., Reata Pharmaceuticals and Stoke Therapeutics go up and down completely randomly.

Pair Corralation between Reata Pharmaceuticals and Stoke Therapeutics

If you would invest  10,967  in Reata Pharmaceuticals on August 30, 2024 and sell it today you would earn a total of  0.00  from holding Reata Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Reata Pharmaceuticals  vs.  Stoke Therapeutics

Reata Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reata Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Reata Pharmaceuticals is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Stoke Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stoke Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak 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.

Pair Trading with Reata Pharmaceuticals and Stoke Therapeutics

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

The idea behind Reata Pharmaceuticals and Stoke 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.