Correlation Between Spero Therapeutics and Lumos Pharma
Can any of the company-specific risk be diversified away by investing in both Spero Therapeutics and Lumos Pharma 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 Spero Therapeutics and Lumos Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spero Therapeutics and Lumos Pharma, you can compare the effects of market volatilities on Spero Therapeutics and Lumos Pharma 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 Spero Therapeutics with a short position of Lumos Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spero Therapeutics and Lumos Pharma.
Diversification Opportunities for Spero Therapeutics and Lumos Pharma
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Spero and Lumos is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Spero Therapeutics and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma and Spero 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 Spero Therapeutics are associated (or correlated) with Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of Spero Therapeutics i.e., Spero Therapeutics and Lumos Pharma go up and down completely randomly.
Pair Corralation between Spero Therapeutics and Lumos Pharma
Given the investment horizon of 90 days Spero Therapeutics is expected to under-perform the Lumos Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Spero Therapeutics is 1.94 times less risky than Lumos Pharma. The stock trades about -0.05 of its potential returns per unit of risk. The Lumos Pharma is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 230.00 in Lumos Pharma on August 30, 2024 and sell it today you would earn a total of 200.00 from holding Lumos Pharma or generate 86.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spero Therapeutics vs. Lumos Pharma
Performance |
| Timeline |
| Spero Therapeutics |
| Lumos Pharma |
Spero Therapeutics and Lumos Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spero Therapeutics and Lumos Pharma
The main advantage of trading using opposite Spero Therapeutics and Lumos Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spero Therapeutics position performs unexpectedly, Lumos Pharma 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 Lumos Pharma will offset losses from the drop in Lumos Pharma's long position.| Spero Therapeutics vs. Assembly Biosciences | Spero Therapeutics vs. Achilles Therapeutics PLC | Spero Therapeutics vs. Instil Bio | Spero Therapeutics vs. CytomX Therapeutics |
| Lumos Pharma vs. Shattuck Labs | Lumos Pharma vs. Eliem Therapeutics | Lumos Pharma vs. Champions Oncology | Lumos Pharma vs. Century 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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