Correlation Between Passage Bio and Palisade Bio

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

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

Diversification Opportunities for Passage Bio and Palisade Bio

-0.34

Correlation Coefficient

Passage Bio  Palisade Bio

Very good diversification

The 3 months correlation between Passage and Palisade is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Palisade Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palisade Bio 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 Palisade Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palisade Bio has no effect on the direction of Passage Bio i.e., Passage Bio and Palisade Bio go up and down completely randomly.

Pair Corralation between Passage Bio and Palisade Bio

Given the investment horizon of 90 days Passage Bio is expected to generate 0.6 times more return on investment than Palisade Bio. However, Passage Bio is 1.66 times less risky than Palisade Bio. It trades about -0.01 of its potential returns per unit of risk. Palisade Bio is currently generating about -0.02 per unit of risk. If you would invest  184.00  in Passage Bio on September 30, 2024 and sell it today you would lose (118.00) from holding Passage Bio or give up 64.13% of portfolio value over 90 days.

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

Passage Bio  vs.  Palisade Bio

Passage Bio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 2 (%) 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.

Palisade Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Palisade Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Passage Bio and Palisade Bio

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

The idea behind Passage Bio and Palisade Bio 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.