Correlation Between Larimar Therapeutics and Crinetics Pharmaceuticals

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

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

Diversification Opportunities for Larimar Therapeutics and Crinetics Pharmaceuticals

-0.6

Correlation Coefficient

Larimar Therapeutics  Crinetics Pharmaceuticals

Excellent diversification

The 3 months correlation between Larimar and Crinetics is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Larimar Therapeutics and Crinetics Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crinetics Pharmaceuticals and Larimar 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 Larimar Therapeutics are associated (or correlated) with Crinetics Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crinetics Pharmaceuticals has no effect on the direction of Larimar Therapeutics i.e., Larimar Therapeutics and Crinetics Pharmaceuticals go up and down completely randomly.

Pair Corralation between Larimar Therapeutics and Crinetics Pharmaceuticals

Given the investment horizon of 90 days Larimar Therapeutics is expected to generate 2.0 times more return on investment than Crinetics Pharmaceuticals. However, Larimar Therapeutics is 2.0 times more volatile than Crinetics Pharmaceuticals. It trades about 0.27 of its potential returns per unit of risk. Crinetics Pharmaceuticals is currently generating about 0.27 per unit of risk. If you would invest  640.00  in Larimar Therapeutics on February 21, 2024 and sell it today you would earn a total of  210.00  from holding Larimar Therapeutics or generate 32.81% return on investment over 90 days.

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

Larimar Therapeutics  vs.  Crinetics Pharmaceuticals

Larimar Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Larimar Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Crinetics Pharmaceuticals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Crinetics Pharmaceuticals are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, Crinetics Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Larimar Therapeutics and Crinetics Pharmaceuticals

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

The idea behind Larimar Therapeutics and Crinetics Pharmaceuticals 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.