Correlation Between Verastem and Pulmatrix
Can any of the company-specific risk be diversified away by investing in both Verastem and Pulmatrix 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 Verastem and Pulmatrix into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Verastem and Pulmatrix, you can compare the effects of market volatilities on Verastem and Pulmatrix 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 Verastem with a short position of Pulmatrix. Check out your portfolio center. Please also check ongoing floating volatility patterns of Verastem and Pulmatrix.
Diversification Opportunities for Verastem and Pulmatrix
Poor diversification
The 3 months correlation between Verastem and Pulmatrix is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Verastem and Pulmatrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulmatrix and Verastem 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 Verastem are associated (or correlated) with Pulmatrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulmatrix has no effect on the direction of Verastem i.e., Verastem and Pulmatrix go up and down completely randomly.
Pair Corralation between Verastem and Pulmatrix
Given the investment horizon of 90 days Verastem is expected to generate 4.17 times less return on investment than Pulmatrix. But when comparing it to its historical volatility, Verastem is 3.0 times less risky than Pulmatrix. It trades about 0.25 of its potential returns per unit of risk. Pulmatrix is currently generating about 0.35 of returns per unit of risk over similar time horizon. If you would invest 213.00 in Pulmatrix on September 2, 2024 and sell it today you would earn a total of 451.00 from holding Pulmatrix or generate 211.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Verastem vs. Pulmatrix
Performance |
| Timeline |
| Verastem |
| Pulmatrix |
Verastem and Pulmatrix Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Verastem and Pulmatrix
The main advantage of trading using opposite Verastem and Pulmatrix positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Verastem position performs unexpectedly, Pulmatrix 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 Pulmatrix will offset losses from the drop in Pulmatrix's long position.The idea behind Verastem and Pulmatrix 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.| Pulmatrix vs. Capricor Therapeutics | Pulmatrix vs. Akari Therapeutics PLC | Pulmatrix vs. Soleno Therapeutics | Pulmatrix vs. Bio Path Holdings |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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