Correlation Between Pliant Therapeutics and Calliditas Therapeutics

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

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

Diversification Opportunities for Pliant Therapeutics and Calliditas Therapeutics

-0.36

Correlation Coefficient

Pliant Therapeutics  Calliditas Therapeutics

Very good diversification

The 3 months correlation between Pliant and Calliditas is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Pliant Therapeutics and Calliditas Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Calliditas Therapeutics and Pliant 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 Pliant Therapeutics are associated (or correlated) with Calliditas Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Calliditas Therapeutics has no effect on the direction of Pliant Therapeutics i.e., Pliant Therapeutics and Calliditas Therapeutics go up and down completely randomly.

Pair Corralation between Pliant Therapeutics and Calliditas Therapeutics

Given the investment horizon of 90 days Pliant Therapeutics is expected to under-perform the Calliditas Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Pliant Therapeutics is 4.61 times less risky than Calliditas Therapeutics. The stock trades about -0.24 of its potential returns per unit of risk. The Calliditas Therapeutics is currently generating about 0.25 of returns per unit of risk over similar time horizon. If you would invest  2,056  in Calliditas Therapeutics on March 9, 2024 and sell it today you would earn a total of  1,889  from holding Calliditas Therapeutics or generate 91.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Pliant Therapeutics  vs.  Calliditas Therapeutics

Pliant Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Pliant Therapeutics 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 basic indicators remain fairly strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Calliditas Therapeutics

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Calliditas Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating essential indicators, Calliditas Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pliant Therapeutics and Calliditas Therapeutics

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

The idea behind Pliant Therapeutics and Calliditas 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.