Correlation Between Passage Bio and Eliem Therapeutics

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

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

Diversification Opportunities for Passage Bio and Eliem Therapeutics

0.29

Correlation Coefficient

Passage Bio  Eliem Therapeutics

Modest diversification

The 3 months correlation between Passage and Eliem is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Eliem Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eliem Therapeutics and Passage Bio 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 Passage Bio are associated (or correlated) with Eliem Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eliem Therapeutics has no effect on the direction of Passage Bio i.e., Passage Bio and Eliem Therapeutics go up and down completely randomly.

Pair Corralation between Passage Bio and Eliem Therapeutics

Given the investment horizon of 90 days Passage Bio is expected to generate 0.82 times more return on investment than Eliem Therapeutics. However, Passage Bio is 1.23 times less risky than Eliem Therapeutics. It trades about -0.1 of its potential returns per unit of risk. Eliem Therapeutics is currently generating about -0.15 per unit of risk. If you would invest  91.00  in Passage Bio on June 30, 2024 and sell it today you would lose (23.00) from holding Passage Bio or give up 25.27% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Passage Bio  vs.  Eliem Therapeutics

Passage Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Passage Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in October 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Eliem Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Passage Bio and Eliem Therapeutics

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

The idea behind Passage Bio and Eliem 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.