Correlation Between BridgeBio Pharma and Mustang Bio

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

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

Diversification Opportunities for BridgeBio Pharma and Mustang Bio

0.7

Correlation Coefficient

BridgeBio Pharma  Mustang Bio

Poor diversification

The 3 months correlation between BridgeBio and Mustang is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding BridgeBio Pharma and Mustang Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustang Bio and BridgeBio Pharma 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 BridgeBio Pharma are associated (or correlated) with Mustang Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustang Bio has no effect on the direction of BridgeBio Pharma i.e., BridgeBio Pharma and Mustang Bio go up and down completely randomly.

Pair Corralation between BridgeBio Pharma and Mustang Bio

Given the investment horizon of 90 days BridgeBio Pharma is expected to generate 1.16 times more return on investment than Mustang Bio. However, BridgeBio Pharma is 1.16 times more volatile than Mustang Bio. It trades about 0.06 of its potential returns per unit of risk. Mustang Bio is currently generating about -0.09 per unit of risk. If you would invest  858.00  in BridgeBio Pharma on January 24, 2024 and sell it today you would earn a total of  1,649  from holding BridgeBio Pharma or generate 192.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

BridgeBio Pharma  vs.  Mustang Bio

BridgeBio Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BridgeBio Pharma 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 forward indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Mustang Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mustang Bio 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 forward indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with BridgeBio Pharma and Mustang Bio

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

The idea behind BridgeBio Pharma and Mustang 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.