Correlation Between Plug Power and Immune Therapeutics

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

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

Diversification Opportunities for Plug Power and Immune Therapeutics

0.3

Correlation Coefficient

Plug Power  Immune Therapeutics

Weak diversification

The 3 months correlation between Plug and Immune is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Plug Power and Immune Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immune Therapeutics and Plug Power 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 Plug Power are associated (or correlated) with Immune Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immune Therapeutics has no effect on the direction of Plug Power i.e., Plug Power and Immune Therapeutics go up and down completely randomly.

Pair Corralation between Plug Power and Immune Therapeutics

Given the investment horizon of 90 days Plug Power is expected to under-perform the Immune Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Plug Power is 1.91 times less risky than Immune Therapeutics. The stock trades about -0.05 of its potential returns per unit of risk. The Immune Therapeutics is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  9.30  in Immune Therapeutics on January 17, 2024 and sell it today you would lose (3.30) from holding Immune Therapeutics or give up 35.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	34.96%
Values	Daily Returns

Plug Power  vs.  Immune Therapeutics

Plug Power

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plug Power are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Plug Power reported solid returns over the last few months and may actually be approaching a breakup point.

Immune Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Immune Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Immune Therapeutics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Plug Power and Immune Therapeutics

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

The idea behind Plug Power and Immune 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.