Correlation Between Sutro Biopharma and Larimar Therapeutics
Can any of the company-specific risk be diversified away by investing in both Sutro Biopharma and Larimar 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 Sutro Biopharma and Larimar Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sutro Biopharma and Larimar Therapeutics, you can compare the effects of market volatilities on Sutro Biopharma and Larimar 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 Sutro Biopharma with a short position of Larimar Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sutro Biopharma and Larimar Therapeutics.
Diversification Opportunities for Sutro Biopharma and Larimar Therapeutics
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sutro and Larimar is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Sutro Biopharma and Larimar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larimar Therapeutics and Sutro Biopharma 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 Sutro Biopharma are associated (or correlated) with Larimar Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larimar Therapeutics has no effect on the direction of Sutro Biopharma i.e., Sutro Biopharma and Larimar Therapeutics go up and down completely randomly.
Pair Corralation between Sutro Biopharma and Larimar Therapeutics
Given the investment horizon of 90 days Sutro Biopharma is expected to under-perform the Larimar Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Sutro Biopharma is 1.09 times less risky than Larimar Therapeutics. The stock trades about -0.15 of its potential returns per unit of risk. The Larimar Therapeutics is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest 797.00 in Larimar Therapeutics on August 28, 2024 and sell it today you would lose (164.00) from holding Larimar Therapeutics or give up 20.58% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sutro Biopharma vs. Larimar Therapeutics
Performance |
| Timeline |
| Sutro Biopharma |
| Larimar Therapeutics |
Sutro Biopharma and Larimar Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sutro Biopharma and Larimar Therapeutics
The main advantage of trading using opposite Sutro Biopharma and Larimar Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sutro Biopharma position performs unexpectedly, Larimar 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 Larimar Therapeutics will offset losses from the drop in Larimar Therapeutics' long position.| Sutro Biopharma vs. Vaxcyte | Sutro Biopharma vs. Larimar Therapeutics | Sutro Biopharma vs. Syndax Pharmaceuticals | Sutro Biopharma vs. Merus BV |
| Larimar Therapeutics vs. Vaxcyte | Larimar Therapeutics vs. Syndax Pharmaceuticals | Larimar Therapeutics vs. Merus BV | Larimar Therapeutics vs. Sutro Biopharma |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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