Correlation Between ChemoCentryx and Design Therapeutics

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

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

Diversification Opportunities for ChemoCentryx and Design Therapeutics

0.48

Correlation Coefficient

ChemoCentryx  Design Therapeutics

Very weak diversification

The 3 months correlation between ChemoCentryx and Design is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding ChemoCentryx and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics and ChemoCentryx 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 ChemoCentryx are associated (or correlated) with Design Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design Therapeutics has no effect on the direction of ChemoCentryx i.e., ChemoCentryx and Design Therapeutics go up and down completely randomly.

Pair Corralation between ChemoCentryx and Design Therapeutics

If you would invest  357.00  in Design Therapeutics on January 26, 2024 and sell it today you would earn a total of  8.00  from holding Design Therapeutics or generate 2.24% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

ChemoCentryx  vs.  Design Therapeutics

ChemoCentryx

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ChemoCentryx has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, ChemoCentryx is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Design Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChemoCentryx and Design Therapeutics

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

The idea behind ChemoCentryx and Design 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.