Correlation Between Phathom Pharmaceuticals and Cue Biopharma

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

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

Diversification Opportunities for Phathom Pharmaceuticals and Cue Biopharma

-0.27

Correlation Coefficient

Phathom Pharmaceuticals  Cue Biopharma

Very good diversification

The 3 months correlation between Phathom and Cue is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Phathom Pharmaceuticals and Cue Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cue Biopharma and Phathom Pharmaceuticals 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 Phathom Pharmaceuticals are associated (or correlated) with Cue Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cue Biopharma has no effect on the direction of Phathom Pharmaceuticals i.e., Phathom Pharmaceuticals and Cue Biopharma go up and down completely randomly.

Pair Corralation between Phathom Pharmaceuticals and Cue Biopharma

Given the investment horizon of 90 days Phathom Pharmaceuticals is expected to under-perform the Cue Biopharma. But the stock apears to be less risky and, when comparing its historical volatility, Phathom Pharmaceuticals is 2.02 times less risky than Cue Biopharma. The stock trades about -0.13 of its potential returns per unit of risk. The Cue Biopharma is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  66.00  in Cue Biopharma on August 31, 2024 and sell it today you would earn a total of  56.00  from holding Cue Biopharma or generate 84.85% return on investment over 90 days.

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

Phathom Pharmaceuticals  vs.  Cue Biopharma

Phathom Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phathom Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic 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.

Cue Biopharma

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cue Biopharma are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Cue Biopharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phathom Pharmaceuticals and Cue Biopharma

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

The idea behind Phathom Pharmaceuticals and Cue Biopharma 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.