Correlation Between PepGen and Pliant Therapeutics

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

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

Diversification Opportunities for PepGen and Pliant Therapeutics

-0.31

Correlation Coefficient

PepGen  Pliant Therapeutics

Very good diversification

The 3 months correlation between PepGen and Pliant is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding PepGen and Pliant Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pliant Therapeutics and PepGen 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 PepGen are associated (or correlated) with Pliant Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pliant Therapeutics has no effect on the direction of PepGen i.e., PepGen and Pliant Therapeutics go up and down completely randomly.

Pair Corralation between PepGen and Pliant Therapeutics

Given the investment horizon of 90 days PepGen is expected to under-perform the Pliant Therapeutics. In addition to that, PepGen is 1.2 times more volatile than Pliant Therapeutics. It trades about -0.19 of its total potential returns per unit of risk. Pliant Therapeutics is currently generating about 0.03 per unit of volatility. If you would invest  1,329  in Pliant Therapeutics on August 30, 2024 and sell it today you would earn a total of  24.00  from holding Pliant Therapeutics or generate 1.81% return on investment over 90 days.

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

PepGen  vs.  Pliant Therapeutics

PepGen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PepGen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pliant Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pliant Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Pliant Therapeutics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with PepGen and Pliant Therapeutics

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

The idea behind PepGen and Pliant Therapeutics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.