Correlation Between Soleno Therapeutics and Pulmatrix

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

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

Diversification Opportunities for Soleno Therapeutics and Pulmatrix

0.3

Correlation Coefficient

Soleno Therapeutics  Pulmatrix

Weak diversification

The 3 months correlation between Soleno and Pulmatrix is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Soleno Therapeutics and Pulmatrix in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pulmatrix and Soleno Therapeutics 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 Soleno Therapeutics are associated (or correlated) with Pulmatrix. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pulmatrix has no effect on the direction of Soleno Therapeutics i.e., Soleno Therapeutics and Pulmatrix go up and down completely randomly.

Pair Corralation between Soleno Therapeutics and Pulmatrix

Given the investment horizon of 90 days Soleno Therapeutics is expected to generate 11.14 times less return on investment than Pulmatrix. But when comparing it to its historical volatility, Soleno Therapeutics is 4.03 times less risky than Pulmatrix. It trades about 0.07 of its potential returns per unit of risk. Pulmatrix is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  208.00  in Pulmatrix on September 2, 2024 and sell it today you would earn a total of  456.00  from holding Pulmatrix or generate 219.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Soleno Therapeutics  vs.  Pulmatrix

Soleno Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Soleno Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Soleno Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pulmatrix

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pulmatrix are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Pulmatrix displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Soleno Therapeutics and Pulmatrix

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

The idea behind Soleno Therapeutics and Pulmatrix 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.