Correlation Between Equillium and Tourmaline Bio

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

Diversification Opportunities for Equillium and Tourmaline Bio

0.59
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Equillium and Tourmaline is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Tourmaline Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tourmaline Bio and Equillium 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 Equillium are associated (or correlated) with Tourmaline Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tourmaline Bio has no effect on the direction of Equillium i.e., Equillium and Tourmaline Bio go up and down completely randomly.

Pair Corralation between Equillium and Tourmaline Bio

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.4 times more return on investment than Tourmaline Bio. However, Equillium is 1.4 times more volatile than Tourmaline Bio. It trades about 0.09 of its potential returns per unit of risk. Tourmaline Bio is currently generating about -0.18 per unit of risk. If you would invest  60.00  in Equillium on October 20, 2024 and sell it today you would earn a total of  4.00  from holding Equillium or generate 6.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Equillium  vs.  Tourmaline Bio

 Performance 
       Timeline  
Equillium 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.
Tourmaline Bio 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Tourmaline Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Equillium and Tourmaline Bio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Equillium and Tourmaline Bio

The main advantage of trading using opposite Equillium and Tourmaline Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Equillium position performs unexpectedly, Tourmaline 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 Tourmaline Bio will offset losses from the drop in Tourmaline Bio's long position.
The idea behind Equillium and Tourmaline Bio 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 Global Correlations module to find global opportunities by holding instruments from different markets.

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