Correlation Between 4D Molecular and Illumina

Can any of the company-specific risk be diversified away by investing in both 4D Molecular and Illumina 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 4D Molecular and Illumina into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 4D Molecular Therapeutics and Illumina, you can compare the effects of market volatilities on 4D Molecular and Illumina 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 4D Molecular with a short position of Illumina. Check out your portfolio center. Please also check ongoing floating volatility patterns of 4D Molecular and Illumina.

Diversification Opportunities for 4D Molecular and Illumina

-0.77

Correlation Coefficient

4D Molecular  Illumina

Pay attention - limited upside

The 3 months correlation between FDMT and Illumina is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding 4D Molecular Therapeutics and Illumina in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Illumina and 4D Molecular 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 4D Molecular Therapeutics are associated (or correlated) with Illumina. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Illumina has no effect on the direction of 4D Molecular i.e., 4D Molecular and Illumina go up and down completely randomly.

Pair Corralation between 4D Molecular and Illumina

Given the investment horizon of 90 days 4D Molecular Therapeutics is expected to under-perform the Illumina. In addition to that, 4D Molecular is 1.39 times more volatile than Illumina. It trades about -0.03 of its total potential returns per unit of risk. Illumina is currently generating about -0.01 per unit of volatility. If you would invest  14,600  in Illumina on August 30, 2024 and sell it today you would lose (164.00) from holding Illumina or give up 1.12% of portfolio value over 90 days.

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

4D Molecular Therapeutics  vs.  Illumina

4D Molecular Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 4D Molecular Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Illumina

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Illumina are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Illumina may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with 4D Molecular and Illumina

The main advantage of trading using opposite 4D Molecular and Illumina positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 4D Molecular position performs unexpectedly, Illumina 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 Illumina will offset losses from the drop in Illumina's long position.

The idea behind 4D Molecular Therapeutics and Illumina 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.