Correlation Between Alpha Tau and Equillium

Can any of the company-specific risk be diversified away by investing in both Alpha Tau and Equillium 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 Alpha Tau and Equillium into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alpha Tau Medical and Equillium, you can compare the effects of market volatilities on Alpha Tau and Equillium 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 Alpha Tau with a short position of Equillium. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpha Tau and Equillium.

Diversification Opportunities for Alpha Tau and Equillium

-0.53

Correlation Coefficient

Alpha Tau  Equillium

Excellent diversification

The 3 months correlation between Alpha and Equillium is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Alpha Tau Medical and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium and Alpha Tau 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 Alpha Tau Medical are associated (or correlated) with Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of Alpha Tau i.e., Alpha Tau and Equillium go up and down completely randomly.

Pair Corralation between Alpha Tau and Equillium

Given the investment horizon of 90 days Alpha Tau Medical is expected to generate 0.38 times more return on investment than Equillium. However, Alpha Tau Medical is 2.64 times less risky than Equillium. It trades about 0.17 of its potential returns per unit of risk. Equillium is currently generating about -0.01 per unit of risk. If you would invest  229.00  in Alpha Tau Medical on September 22, 2024 and sell it today you would earn a total of  81.00  from holding Alpha Tau Medical or generate 35.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Alpha Tau Medical  vs.  Equillium

Alpha Tau Medical

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Alpha Tau Medical are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Alpha Tau unveiled solid returns over the last few months and may actually be approaching a breakup point.

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equillium is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Alpha Tau and Equillium

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

The idea behind Alpha Tau Medical and Equillium 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.