Correlation Between Equillium and Revelation Biosciences

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

By analyzing existing cross correlation between Equillium and Revelation Biosciences, you can compare the effects of market volatilities on Equillium and Revelation Biosciences 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 Revelation Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Equillium and Revelation Biosciences.

Diversification Opportunities for Equillium and Revelation Biosciences

-0.1

Correlation Coefficient

Equillium  Revelation Biosciences

Good diversification

The 3 months correlation between Equillium and Revelation is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Revelation Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revelation Biosciences 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 Revelation Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revelation Biosciences has no effect on the direction of Equillium i.e., Equillium and Revelation Biosciences go up and down completely randomly.

Pair Corralation between Equillium and Revelation Biosciences

Allowing for the 90-day total investment horizon Equillium is expected to under-perform the Revelation Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Equillium is 1.18 times less risky than Revelation Biosciences. The stock trades about -0.03 of its potential returns per unit of risk. The Revelation Biosciences is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  1.37  in Revelation Biosciences on September 12, 2024 and sell it today you would lose (0.09) from holding Revelation Biosciences or give up 6.57% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Equillium  vs.  Revelation Biosciences

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.

Revelation Biosciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Revelation Biosciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Revelation Biosciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equillium and Revelation Biosciences

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

The idea behind Equillium and Revelation Biosciences 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.