Correlation Between ATyr Pharma and Equillium

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Can any of the company-specific risk be diversified away by investing in both ATyr Pharma and Equillium 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 ATyr Pharma and Equillium into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ATyr Pharma and Equillium, you can compare the effects of market volatilities on ATyr Pharma and Equillium 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 ATyr Pharma with a short position of Equillium. Check out your portfolio center. Please also check ongoing floating volatility patterns of ATyr Pharma and Equillium.

Diversification Opportunities for ATyr Pharma and Equillium

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between ATyr and Equillium is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding ATyr Pharma and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium and ATyr 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 ATyr Pharma are associated (or correlated) with Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of ATyr Pharma i.e., ATyr Pharma and Equillium go up and down completely randomly.

Pair Corralation between ATyr Pharma and Equillium

Given the investment horizon of 90 days ATyr Pharma is expected to under-perform the Equillium. But the stock apears to be less risky and, when comparing its historical volatility, ATyr Pharma is 1.73 times less risky than Equillium. The stock trades about -0.03 of its potential returns per unit of risk. The Equillium is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  313.00  in Equillium on December 29, 2023 and sell it today you would lose (107.00) from holding Equillium or give up 34.19% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

ATyr Pharma  vs.  Equillium

 Performance 
       Timeline  
ATyr Pharma 

Risk-Adjusted Performance

10 of 100

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

Risk-Adjusted Performance

15 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

ATyr Pharma and Equillium Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with ATyr Pharma and Equillium

The main advantage of trading using opposite ATyr Pharma and Equillium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ATyr Pharma position performs unexpectedly, Equillium 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 Equillium will offset losses from the drop in Equillium's long position.
The idea behind ATyr Pharma and Equillium 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.
Check out your portfolio center.
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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.

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