Correlation Between Spero Therapeutics and Passage Bio
Can any of the company-specific risk be diversified away by investing in both Spero 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 Spero 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 Spero Therapeutics and Passage Bio, you can compare the effects of market volatilities on Spero 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 Spero Therapeutics with a short position of Passage Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spero Therapeutics and Passage Bio.
Diversification Opportunities for Spero Therapeutics and Passage Bio
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Spero and Passage is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Spero Therapeutics and Passage Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Passage Bio 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 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 Spero Therapeutics i.e., Spero Therapeutics and Passage Bio go up and down completely randomly.
Pair Corralation between Spero Therapeutics and Passage Bio
Given the investment horizon of 90 days Spero Therapeutics is expected to under-perform the Passage Bio. But the stock apears to be less risky and, when comparing its historical volatility, Spero Therapeutics is 1.52 times less risky than Passage Bio. The stock trades about -0.19 of its potential returns per unit of risk. The Passage Bio is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 40.00 in Passage Bio on January 11, 2025 and sell it today you would earn a total of 1.00 from holding Passage Bio or generate 2.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spero Therapeutics vs. Passage Bio
Performance |
| Timeline |
| Spero Therapeutics |
| Passage Bio |
Spero Therapeutics and Passage Bio Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spero Therapeutics and Passage Bio
The main advantage of trading using opposite Spero Therapeutics and Passage Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spero 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.| Spero Therapeutics vs. Assembly Biosciences | Spero Therapeutics vs. Instil Bio | Spero Therapeutics vs. CytomX Therapeutics | Spero Therapeutics vs. NextCure |
| 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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