Correlation Between Responsive Industries and SpringWorks Therapeutics

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

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

Diversification Opportunities for Responsive Industries and SpringWorks Therapeutics

0.01

Correlation Coefficient

Responsive Industries  SpringWorks Therapeutics

Significant diversification

The 3 months correlation between Responsive and SpringWorks is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Responsive Industries Limited and SpringWorks Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpringWorks Therapeutics and Responsive Industries 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 Responsive Industries Limited are associated (or correlated) with SpringWorks Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpringWorks Therapeutics has no effect on the direction of Responsive Industries i.e., Responsive Industries and SpringWorks Therapeutics go up and down completely randomly.

Pair Corralation between Responsive Industries and SpringWorks Therapeutics

Assuming the 90 days trading horizon Responsive Industries Limited is expected to under-perform the SpringWorks Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Responsive Industries Limited is 1.85 times less risky than SpringWorks Therapeutics. The stock trades about -0.05 of its potential returns per unit of risk. The SpringWorks Therapeutics is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  4,452  in SpringWorks Therapeutics on February 4, 2024 and sell it today you would earn a total of  59.00  from holding SpringWorks Therapeutics or generate 1.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	86.36%
Values	Daily Returns

Responsive Industries Limited  vs.  SpringWorks Therapeutics

Responsive Industries

Risk-Adjusted Performance

0 of 100

Very Weak

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

SpringWorks Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SpringWorks Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SpringWorks Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Responsive Industries and SpringWorks Therapeutics

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

The idea behind Responsive Industries Limited and SpringWorks 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.