Correlation Between Passage Bio and Crinetics Pharmaceuticals

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

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

Diversification Opportunities for Passage Bio and Crinetics Pharmaceuticals

-0.2

Correlation Coefficient

Passage Bio  Crinetics Pharmaceuticals

Good diversification

The 3 months correlation between Passage and Crinetics is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Crinetics Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crinetics Pharmaceuticals and Passage Bio 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 Passage Bio are associated (or correlated) with Crinetics Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crinetics Pharmaceuticals has no effect on the direction of Passage Bio i.e., Passage Bio and Crinetics Pharmaceuticals go up and down completely randomly.

Pair Corralation between Passage Bio and Crinetics Pharmaceuticals

Given the investment horizon of 90 days Passage Bio is expected to generate 4.58 times more return on investment than Crinetics Pharmaceuticals. However, Passage Bio is 4.58 times more volatile than Crinetics Pharmaceuticals. It trades about 0.12 of its potential returns per unit of risk. Crinetics Pharmaceuticals is currently generating about 0.07 per unit of risk. If you would invest  66.00  in Passage Bio on September 1, 2024 and sell it today you would earn a total of  47.00  from holding Passage Bio or generate 71.21% return on investment over 90 days.

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

Passage Bio  vs.  Crinetics Pharmaceuticals

Passage Bio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Passage Bio reported solid returns over the last few months and may actually be approaching a breakup point.

Crinetics Pharmaceuticals

Risk-Adjusted Performance

5 of 100

Modest

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

Pair Trading with Passage Bio and Crinetics Pharmaceuticals

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

The idea behind Passage Bio and Crinetics 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.