Correlation Between Cytokinetics and Karuna Therapeutics

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Can any of the company-specific risk be diversified away by investing in both Cytokinetics 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 Cytokinetics and Karuna Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cytokinetics and Karuna Therapeutics, you can compare the effects of market volatilities on Cytokinetics 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 Cytokinetics with a short position of Karuna Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cytokinetics and Karuna Therapeutics.

Diversification Opportunities for Cytokinetics and Karuna Therapeutics

-0.07
  Correlation Coefficient

Good diversification

The 3 months correlation between Cytokinetics and Karuna is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Cytokinetics and Karuna Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karuna Therapeutics and Cytokinetics 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 Cytokinetics 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 Cytokinetics i.e., Cytokinetics and Karuna Therapeutics go up and down completely randomly.

Pair Corralation between Cytokinetics and Karuna Therapeutics

Given the investment horizon of 90 days Cytokinetics is expected to generate 2.09 times more return on investment than Karuna Therapeutics. However, Cytokinetics is 2.09 times more volatile than Karuna Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Karuna Therapeutics is currently generating about 0.02 per unit of risk. If you would invest  3,577  in Cytokinetics on August 30, 2024 and sell it today you would earn a total of  1,645  from holding Cytokinetics or generate 45.99% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy31.31%
ValuesDaily Returns

Cytokinetics  vs.  Karuna Therapeutics

 Performance 
       Timeline  
Cytokinetics 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Cytokinetics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.
Karuna Therapeutics 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
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.

Cytokinetics and Karuna Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Cytokinetics and Karuna Therapeutics

The main advantage of trading using opposite Cytokinetics and Karuna Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cytokinetics 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 Cytokinetics 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.
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 Stocks Directory module to find actively traded stocks across global markets.

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