Correlation Between Equillium and Acumen Pharmaceuticals

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

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

Diversification Opportunities for Equillium and Acumen Pharmaceuticals

0.4

Correlation Coefficient

Equillium  Acumen Pharmaceuticals

Very weak diversification

The 3 months correlation between Equillium and Acumen is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Acumen Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acumen Pharmaceuticals and Equillium 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 Equillium are associated (or correlated) with Acumen Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acumen Pharmaceuticals has no effect on the direction of Equillium i.e., Equillium and Acumen Pharmaceuticals go up and down completely randomly.

Pair Corralation between Equillium and Acumen Pharmaceuticals

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.81 times more return on investment than Acumen Pharmaceuticals. However, Equillium is 1.81 times more volatile than Acumen Pharmaceuticals. It trades about -0.01 of its potential returns per unit of risk. Acumen Pharmaceuticals is currently generating about -0.03 per unit of risk. If you would invest  87.00  in Equillium on September 13, 2024 and sell it today you would lose (17.00) from holding Equillium or give up 19.54% of portfolio value over 90 days.

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

Equillium  vs.  Acumen Pharmaceuticals

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.

Acumen Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acumen Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Equillium and Acumen Pharmaceuticals

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

The idea behind Equillium and Acumen Pharmaceuticals 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.

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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.