Correlation Between McGrath RentCorp and CRISPR Therapeutics

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

Diversification Opportunities for McGrath RentCorp and CRISPR Therapeutics

-0.56
  Correlation Coefficient

Excellent diversification

The 3 months correlation between McGrath and CRISPR is -0.56. Overlapping area represents the amount of risk that can be diversified away by holding McGrath RentCorp and CRISPR Therapeutics AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CRISPR Therapeutics and McGrath RentCorp 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 McGrath RentCorp are associated (or correlated) with CRISPR Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CRISPR Therapeutics has no effect on the direction of McGrath RentCorp i.e., McGrath RentCorp and CRISPR Therapeutics go up and down completely randomly.

Pair Corralation between McGrath RentCorp and CRISPR Therapeutics

Given the investment horizon of 90 days McGrath RentCorp is expected to generate 0.43 times more return on investment than CRISPR Therapeutics. However, McGrath RentCorp is 2.34 times less risky than CRISPR Therapeutics. It trades about 0.06 of its potential returns per unit of risk. CRISPR Therapeutics AG is currently generating about -0.03 per unit of risk. If you would invest  6,234  in McGrath RentCorp on August 30, 2022 and sell it today you would earn a total of  3,533  from holding McGrath RentCorp or generate 56.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy99.8%
ValuesDaily Returns

McGrath RentCorp  vs.  CRISPR Therapeutics AG

 Performance (%) 
       Timeline  
McGrath RentCorp 
McGrath Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in McGrath RentCorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, McGrath RentCorp sustained solid returns over the last few months and may actually be approaching a breakup point.

McGrath Price Channel

CRISPR Therapeutics 
CRISPR Performance
0 of 100
Over the last 90 days CRISPR Therapeutics AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm insiders.

CRISPR Price Channel

McGrath RentCorp and CRISPR Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with McGrath RentCorp and CRISPR Therapeutics

The main advantage of trading using opposite McGrath RentCorp and CRISPR Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if McGrath RentCorp position performs unexpectedly, CRISPR 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 CRISPR Therapeutics will offset losses from the drop in CRISPR Therapeutics' long position.
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The idea behind McGrath RentCorp and CRISPR Therapeutics AG 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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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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