Correlation Between Armata Pharmaceuticals and Spero Therapeutics

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

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

Diversification Opportunities for Armata Pharmaceuticals and Spero Therapeutics

0.33

Correlation Coefficient

Armata Pharmaceuticals  Spero Therapeutics

Weak diversification

The 3 months correlation between Armata and Spero is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Armata Pharmaceuticals and Spero Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spero Therapeutics and Armata Pharmaceuticals 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 Armata Pharmaceuticals are associated (or correlated) with Spero Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spero Therapeutics has no effect on the direction of Armata Pharmaceuticals i.e., Armata Pharmaceuticals and Spero Therapeutics go up and down completely randomly.

Pair Corralation between Armata Pharmaceuticals and Spero Therapeutics

Given the investment horizon of 90 days Armata Pharmaceuticals is expected to generate 1.81 times more return on investment than Spero Therapeutics. However, Armata Pharmaceuticals is 1.81 times more volatile than Spero Therapeutics. It trades about 0.01 of its potential returns per unit of risk. Spero Therapeutics is currently generating about -0.12 per unit of risk. If you would invest  226.00  in Armata Pharmaceuticals on September 17, 2024 and sell it today you would lose (7.00) from holding Armata Pharmaceuticals or give up 3.1% of portfolio value over 90 days.

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

Armata Pharmaceuticals  vs.  Spero Therapeutics

Armata Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Armata Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Armata Pharmaceuticals is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Spero Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spero Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Armata Pharmaceuticals and Spero Therapeutics

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

The idea behind Armata Pharmaceuticals and Spero 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.