Correlation Between Rallybio Corp and Eliem Therapeutics

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

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

Diversification Opportunities for Rallybio Corp and Eliem Therapeutics

0.38

Correlation Coefficient

Rallybio Corp  Eliem Therapeutics

Weak diversification

The 3 months correlation between Rallybio and Eliem is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Rallybio Corp and Eliem Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eliem Therapeutics and Rallybio Corp 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 Rallybio Corp are associated (or correlated) with Eliem Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eliem Therapeutics has no effect on the direction of Rallybio Corp i.e., Rallybio Corp and Eliem Therapeutics go up and down completely randomly.

Pair Corralation between Rallybio Corp and Eliem Therapeutics

Given the investment horizon of 90 days Rallybio Corp is expected to under-perform the Eliem Therapeutics. In addition to that, Rallybio Corp is 2.39 times more volatile than Eliem Therapeutics. It trades about -0.27 of its total potential returns per unit of risk. Eliem Therapeutics is currently generating about -0.5 per unit of volatility. If you would invest  323.00  in Eliem Therapeutics on September 30, 2024 and sell it today you would lose (14.00) from holding Eliem Therapeutics or give up 4.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	23.81%
Values	Daily Returns

Rallybio Corp  vs.  Eliem Therapeutics

Rallybio Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rallybio Corp 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 basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Eliem Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eliem Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Rallybio Corp and Eliem Therapeutics

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

The idea behind Rallybio Corp and Eliem 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.