Correlation Between CSL and Heron Therapeuti
Can any of the company-specific risk be diversified away by investing in both CSL and Heron Therapeuti 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 CSL and Heron Therapeuti into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL and Heron Therapeuti, you can compare the effects of market volatilities on CSL and Heron Therapeuti 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 CSL with a short position of Heron Therapeuti. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Heron Therapeuti.
Diversification Opportunities for CSL and Heron Therapeuti
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CSL and Heron is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Heron Therapeuti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heron Therapeuti and CSL 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 CSL are associated (or correlated) with Heron Therapeuti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heron Therapeuti has no effect on the direction of CSL i.e., CSL and Heron Therapeuti go up and down completely randomly.
Pair Corralation between CSL and Heron Therapeuti
Assuming the 90 days horizon CSL is expected to generate 0.16 times more return on investment than Heron Therapeuti. However, CSL is 6.11 times less risky than Heron Therapeuti. It trades about -0.31 of its potential returns per unit of risk. Heron Therapeuti is currently generating about -0.28 per unit of risk. If you would invest 9,708 in CSL on August 24, 2024 and sell it today you would lose (778.00) from holding CSL or give up 8.01% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL vs. Heron Therapeuti
Performance |
| Timeline |
| CSL |
| Heron Therapeuti |
CSL and Heron Therapeuti Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Heron Therapeuti
The main advantage of trading using opposite CSL and Heron Therapeuti positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL position performs unexpectedly, Heron Therapeuti 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 Heron Therapeuti will offset losses from the drop in Heron Therapeuti's long position.The idea behind CSL and Heron Therapeuti 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.| Heron Therapeuti vs. Mereo BioPharma Group | Heron Therapeuti vs. Terns Pharmaceuticals | Heron Therapeuti vs. PDS Biotechnology Corp | Heron Therapeuti vs. Inozyme Pharma |
Check out your portfolio center.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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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