Correlation Between Passage Bio and Design Therapeutics
Can any of the company-specific risk be diversified away by investing in both Passage Bio and Design 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 Passage Bio and Design Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Passage Bio and Design Therapeutics, you can compare the effects of market volatilities on Passage Bio and Design 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 Passage Bio with a short position of Design Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Passage Bio and Design Therapeutics.
Diversification Opportunities for Passage Bio and Design Therapeutics
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Passage and Design is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Design Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Design Therapeutics and Passage Bio 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 Passage Bio are associated (or correlated) with Design Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Design Therapeutics has no effect on the direction of Passage Bio i.e., Passage Bio and Design Therapeutics go up and down completely randomly.
Pair Corralation between Passage Bio and Design Therapeutics
Given the investment horizon of 90 days Passage Bio is expected to generate 1.85 times more return on investment than Design Therapeutics. However, Passage Bio is 1.85 times more volatile than Design Therapeutics. It trades about 0.01 of its potential returns per unit of risk. Design Therapeutics is currently generating about -0.14 per unit of risk. If you would invest 65.00 in Passage Bio on October 22, 2024 and sell it today you would lose (5.00) from holding Passage Bio or give up 7.69% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Passage Bio vs. Design Therapeutics
Performance |
| Timeline |
| Passage Bio |
| Design Therapeutics |
Passage Bio and Design Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Passage Bio and Design Therapeutics
The main advantage of trading using opposite Passage Bio and Design Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Passage Bio position performs unexpectedly, Design 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 Design Therapeutics will offset losses from the drop in Design Therapeutics' long position.| Passage Bio vs. Black Diamond Therapeutics | Passage Bio vs. Revolution Medicines | Passage Bio vs. Stoke Therapeutics | Passage Bio vs. Cabaletta Bio |
| Design Therapeutics vs. Monte Rosa Therapeutics | Design Therapeutics vs. Werewolf Therapeutics | Design Therapeutics vs. Ikena Oncology | Design Therapeutics vs. Stoke Therapeutics |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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