Correlation Between BridgeBio Pharma and Mustang Bio

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

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

Diversification Opportunities for BridgeBio Pharma and Mustang Bio

-0.06

Correlation Coefficient

BridgeBio Pharma  Mustang Bio

Good diversification

The 3 months correlation between BridgeBio and Mustang is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding BridgeBio Pharma and Mustang Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustang Bio and BridgeBio Pharma 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 BridgeBio Pharma are associated (or correlated) with Mustang Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustang Bio has no effect on the direction of BridgeBio Pharma i.e., BridgeBio Pharma and Mustang Bio go up and down completely randomly.

Pair Corralation between BridgeBio Pharma and Mustang Bio

Given the investment horizon of 90 days BridgeBio Pharma is expected to generate 0.59 times more return on investment than Mustang Bio. However, BridgeBio Pharma is 1.68 times less risky than Mustang Bio. It trades about 0.04 of its potential returns per unit of risk. Mustang Bio is currently generating about -0.06 per unit of risk. If you would invest  2,799  in BridgeBio Pharma on September 11, 2024 and sell it today you would earn a total of  151.00  from holding BridgeBio Pharma or generate 5.39% return on investment over 90 days.

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

BridgeBio Pharma  vs.  Mustang Bio

BridgeBio Pharma

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in BridgeBio Pharma are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady forward indicators, BridgeBio Pharma may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mustang Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mustang Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's forward 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 BridgeBio Pharma and Mustang Bio

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

The idea behind BridgeBio Pharma and Mustang Bio 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.