Correlation Between Verona Pharma and Capricor Therapeutics
Can any of the company-specific risk be diversified away by investing in both Verona Pharma and Capricor 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 Verona Pharma and Capricor Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verona Pharma PLC and Capricor Therapeutics, you can compare the effects of market volatilities on Verona Pharma and Capricor 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 Verona Pharma with a short position of Capricor Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verona Pharma and Capricor Therapeutics.
Diversification Opportunities for Verona Pharma and Capricor Therapeutics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Verona and Capricor is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Verona Pharma PLC and Capricor Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capricor Therapeutics and Verona Pharma 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 Verona Pharma PLC are associated (or correlated) with Capricor Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capricor Therapeutics has no effect on the direction of Verona Pharma i.e., Verona Pharma and Capricor Therapeutics go up and down completely randomly.
Pair Corralation between Verona Pharma and Capricor Therapeutics
Given the investment horizon of 90 days Verona Pharma is expected to generate 2.54 times less return on investment than Capricor Therapeutics. But when comparing it to its historical volatility, Verona Pharma PLC is 1.85 times less risky than Capricor Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Capricor Therapeutics is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 458.00 in Capricor Therapeutics on August 31, 2024 and sell it today you would earn a total of 1,443 from holding Capricor Therapeutics or generate 315.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verona Pharma PLC vs. Capricor Therapeutics
Performance |
| Timeline |
| Verona Pharma PLC |
| Capricor Therapeutics |
Verona Pharma and Capricor Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verona Pharma and Capricor Therapeutics
The main advantage of trading using opposite Verona Pharma and Capricor Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verona Pharma position performs unexpectedly, Capricor 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 Capricor Therapeutics will offset losses from the drop in Capricor Therapeutics' long position.| Verona Pharma vs. Cue Biopharma | Verona Pharma vs. Eliem Therapeutics | Verona Pharma vs. Inhibrx | Verona Pharma vs. Molecular Partners AG |
| Capricor Therapeutics vs. Bio Path Holdings | Capricor Therapeutics vs. NextCure | Capricor Therapeutics vs. Pulmatrix | Capricor Therapeutics vs. Akari Therapeutics PLC |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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