Correlation Between Design Therapeutics and Passage Bio
Can any of the company-specific risk be diversified away by investing in both Design Therapeutics and Passage Bio 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 Design Therapeutics and Passage Bio into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Design Therapeutics and Passage Bio, you can compare the effects of market volatilities on Design Therapeutics and Passage Bio 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 Design Therapeutics with a short position of Passage Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Design Therapeutics and Passage Bio.
Diversification Opportunities for Design Therapeutics and Passage Bio
0.02 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Design and Passage is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Passage Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Passage Bio and Design Therapeutics 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 Design Therapeutics are associated (or correlated) with Passage Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Passage Bio has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Passage Bio go up and down completely randomly.
Pair Corralation between Design Therapeutics and Passage Bio
Given the investment horizon of 90 days Design Therapeutics is expected to generate 3.63 times less return on investment than Passage Bio. But when comparing it to its historical volatility, Design Therapeutics is 2.66 times less risky than Passage Bio. It trades about 0.16 of its potential returns per unit of risk. Passage Bio is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 60.00 in Passage Bio on September 3, 2024 and sell it today you would earn a total of 41.00 from holding Passage Bio or generate 68.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Design Therapeutics vs. Passage Bio
Performance |
| Timeline |
| Design Therapeutics |
| Passage Bio |
Design Therapeutics and Passage Bio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Design Therapeutics and Passage Bio
The main advantage of trading using opposite Design Therapeutics and Passage Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Design Therapeutics position performs unexpectedly, Passage Bio 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 Passage Bio will offset losses from the drop in Passage Bio's long position.| Design Therapeutics vs. DiaMedica Therapeutics | Design Therapeutics vs. Lyra Therapeutics | Design Therapeutics vs. Centessa Pharmaceuticals PLC |
| Passage Bio vs. Black Diamond Therapeutics | Passage Bio vs. Revolution Medicines | Passage Bio vs. Stoke Therapeutics | Passage Bio vs. Cabaletta Bio |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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