Correlation Between Connect Biopharma and Phathom Pharmaceuticals

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

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

Diversification Opportunities for Connect Biopharma and Phathom Pharmaceuticals

0.75

Correlation Coefficient

Connect Biopharma  Phathom Pharmaceuticals

Poor diversification

The 3 months correlation between Connect and Phathom is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings and Phathom Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phathom Pharmaceuticals and Connect Biopharma 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 Connect Biopharma Holdings are associated (or correlated) with Phathom Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phathom Pharmaceuticals has no effect on the direction of Connect Biopharma i.e., Connect Biopharma and Phathom Pharmaceuticals go up and down completely randomly.

Pair Corralation between Connect Biopharma and Phathom Pharmaceuticals

Given the investment horizon of 90 days Connect Biopharma Holdings is expected to generate 0.87 times more return on investment than Phathom Pharmaceuticals. However, Connect Biopharma Holdings is 1.15 times less risky than Phathom Pharmaceuticals. It trades about 0.01 of its potential returns per unit of risk. Phathom Pharmaceuticals is currently generating about -0.19 per unit of risk. If you would invest  120.00  in Connect Biopharma Holdings on September 12, 2024 and sell it today you would lose (7.00) from holding Connect Biopharma Holdings or give up 5.83% of portfolio value over 90 days.

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

Connect Biopharma Holdings  vs.  Phathom Pharmaceuticals

Connect Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Connect Biopharma is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Phathom Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phathom Pharmaceuticals 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 comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Connect Biopharma and Phathom Pharmaceuticals

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

The idea behind Connect Biopharma Holdings and Phathom Pharmaceuticals 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.