Correlation Between Rafael Holdings and Karuna Therapeutics

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

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

Diversification Opportunities for Rafael Holdings and Karuna Therapeutics

-0.08

Correlation Coefficient

Rafael Holdings  Karuna Therapeutics

Good diversification

The 3 months correlation between Rafael and Karuna is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Rafael Holdings Class and Karuna Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karuna Therapeutics and Rafael Holdings 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 Rafael Holdings Class are associated (or correlated) with Karuna Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karuna Therapeutics has no effect on the direction of Rafael Holdings i.e., Rafael Holdings and Karuna Therapeutics go up and down completely randomly.

Pair Corralation between Rafael Holdings and Karuna Therapeutics

If you would invest  170.00  in Rafael Holdings Class on January 16, 2024 and sell it today you would earn a total of  12.00  from holding Rafael Holdings Class or generate 7.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	10.0%
Values	Daily Returns

Rafael Holdings Class  vs.  Karuna Therapeutics

Rafael Holdings Class

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Rafael Holdings Class are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, Rafael Holdings is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Karuna Therapeutics

Risk-Adjusted Performance

0 of 100

Good

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

Pair Trading with Rafael Holdings and Karuna Therapeutics

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

The idea behind Rafael Holdings Class and Karuna 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..