Correlation Between Equillium and Allogene Therapeutics

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

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

Diversification Opportunities for Equillium and Allogene Therapeutics

0.86

Correlation Coefficient

Equillium  Allogene Therapeutics

Very poor diversification

The 3 months correlation between Equillium and Allogene is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Allogene Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Allogene Therapeutics and Equillium 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 Equillium are associated (or correlated) with Allogene Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Allogene Therapeutics has no effect on the direction of Equillium i.e., Equillium and Allogene Therapeutics go up and down completely randomly.

Pair Corralation between Equillium and Allogene Therapeutics

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.18 times more return on investment than Allogene Therapeutics. However, Equillium is 1.18 times more volatile than Allogene Therapeutics. It trades about -0.14 of its potential returns per unit of risk. Allogene Therapeutics is currently generating about -0.22 per unit of risk. If you would invest  172.00  in Equillium on February 23, 2024 and sell it today you would lose (30.50) from holding Equillium or give up 17.73% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Equillium  vs.  Allogene Therapeutics

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in June 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Allogene Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Allogene Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's essential indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Equillium and Allogene Therapeutics

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

The idea behind Equillium and Allogene 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.