Correlation Between Spyre Therapeutics and ARCA Japan

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

Diversification Opportunities for Spyre Therapeutics and ARCA Japan

0.15
  Correlation Coefficient

Average diversification

The 3 months correlation between Spyre and ARCA is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Spyre Therapeutics and ARCA Japan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCA Japan and Spyre 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 Spyre Therapeutics are associated (or correlated) with ARCA Japan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCA Japan has no effect on the direction of Spyre Therapeutics i.e., Spyre Therapeutics and ARCA Japan go up and down completely randomly.
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Pair Corralation between Spyre Therapeutics and ARCA Japan

Given the investment horizon of 90 days Spyre Therapeutics is expected to under-perform the ARCA Japan. In addition to that, Spyre Therapeutics is 4.87 times more volatile than ARCA Japan. It trades about -0.21 of its total potential returns per unit of risk. ARCA Japan is currently generating about -0.06 per unit of volatility. If you would invest  36,223  in ARCA Japan on August 31, 2024 and sell it today you would lose (369.00) from holding ARCA Japan or give up 1.02% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy81.82%
ValuesDaily Returns

Spyre Therapeutics  vs.  ARCA Japan

 Performance 
       Timeline  

Spyre Therapeutics and ARCA Japan Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Spyre Therapeutics and ARCA Japan

The main advantage of trading using opposite Spyre Therapeutics and ARCA Japan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spyre Therapeutics position performs unexpectedly, ARCA Japan 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 ARCA Japan will offset losses from the drop in ARCA Japan's long position.
The idea behind Spyre Therapeutics and ARCA Japan 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.
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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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