Correlation Between Lifecore Biomedical and Design Therapeutics

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

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

Diversification Opportunities for Lifecore Biomedical and Design Therapeutics

-0.71

Correlation Coefficient

Lifecore Biomedical  Design Therapeutics

Pay attention - limited upside

The 3 months correlation between Lifecore and Design is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Lifecore Biomedical and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics and Lifecore Biomedical 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 Lifecore Biomedical 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 Lifecore Biomedical i.e., Lifecore Biomedical and Design Therapeutics go up and down completely randomly.

Pair Corralation between Lifecore Biomedical and Design Therapeutics

Given the investment horizon of 90 days Lifecore Biomedical is expected to under-perform the Design Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Lifecore Biomedical is 2.68 times less risky than Design Therapeutics. The stock trades about -0.14 of its potential returns per unit of risk. The Design Therapeutics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  366.00  in Design Therapeutics on February 23, 2024 and sell it today you would earn a total of  50.00  from holding Design Therapeutics or generate 13.66% return on investment over 90 days.

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

Lifecore Biomedical  vs.  Design Therapeutics

Lifecore Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lifecore Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental 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.

Design Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain 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 Lifecore Biomedical and Design Therapeutics

The main advantage of trading using opposite Lifecore Biomedical and Design Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lifecore Biomedical 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 Lifecore Biomedical 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.