Correlation Between Bright Minds and FibroGen

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

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

Diversification Opportunities for Bright Minds and FibroGen

-0.5

Correlation Coefficient

Bright Minds  FibroGen

Very good diversification

The 3 months correlation between Bright and FibroGen is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Bright Minds Biosciences and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen and Bright Minds 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 Bright Minds Biosciences are associated (or correlated) with FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Bright Minds i.e., Bright Minds and FibroGen go up and down completely randomly.

Pair Corralation between Bright Minds and FibroGen

Given the investment horizon of 90 days Bright Minds Biosciences is expected to generate 21.47 times more return on investment than FibroGen. However, Bright Minds is 21.47 times more volatile than FibroGen. It trades about 0.15 of its potential returns per unit of risk. FibroGen is currently generating about -0.05 per unit of risk. If you would invest  127.00  in Bright Minds Biosciences on September 13, 2024 and sell it today you would earn a total of  3,637  from holding Bright Minds Biosciences or generate 2863.78% return on investment over 90 days.

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

Bright Minds Biosciences  vs.  FibroGen

Bright Minds Biosciences

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bright Minds Biosciences are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Bright Minds reported solid returns over the last few months and may actually be approaching a breakup point.

FibroGen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FibroGen 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 technical and fundamental 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 Bright Minds and FibroGen

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

The idea behind Bright Minds Biosciences and FibroGen 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.