Correlation Between Moleculin Biotech and BridgeBio Pharma

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

Diversification Opportunities for Moleculin Biotech and BridgeBio Pharma

0.5
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Moleculin and BridgeBio is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Moleculin Biotech and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio Pharma and Moleculin Biotech 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 Moleculin Biotech are associated (or correlated) with BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of Moleculin Biotech i.e., Moleculin Biotech and BridgeBio Pharma go up and down completely randomly.

Pair Corralation between Moleculin Biotech and BridgeBio Pharma

Given the investment horizon of 90 days Moleculin Biotech is expected to under-perform the BridgeBio Pharma. In addition to that, Moleculin Biotech is 2.68 times more volatile than BridgeBio Pharma. It trades about -0.18 of its total potential returns per unit of risk. BridgeBio Pharma is currently generating about -0.16 per unit of volatility. If you would invest  3,529  in BridgeBio Pharma on December 30, 2023 and sell it today you would lose (437.00) from holding BridgeBio Pharma or give up 12.38% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Moleculin Biotech  vs.  BridgeBio Pharma

 Performance 
       Timeline  
Moleculin Biotech 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Moleculin Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
BridgeBio Pharma 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
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 unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Moleculin Biotech and BridgeBio Pharma Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Moleculin Biotech and BridgeBio Pharma

The main advantage of trading using opposite Moleculin Biotech and BridgeBio Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Moleculin Biotech position performs unexpectedly, BridgeBio Pharma 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 BridgeBio Pharma will offset losses from the drop in BridgeBio Pharma's long position.
The idea behind Moleculin Biotech and BridgeBio Pharma 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.

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