Correlation Between Equillium and Cognition Therapeutics

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

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

Diversification Opportunities for Equillium and Cognition Therapeutics

-0.26

Correlation Coefficient

Equillium  Cognition Therapeutics

Very good diversification

The 3 months correlation between Equillium and Cognition is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Cognition Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cognition Therapeutics and Equillium 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 Equillium are associated (or correlated) with Cognition Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cognition Therapeutics has no effect on the direction of Equillium i.e., Equillium and Cognition Therapeutics go up and down completely randomly.

Pair Corralation between Equillium and Cognition Therapeutics

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.19 times more return on investment than Cognition Therapeutics. However, Equillium is 1.19 times more volatile than Cognition Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Cognition Therapeutics is currently generating about -0.07 per unit of risk. If you would invest  60.00  in Equillium on December 23, 2024 and sell it today you would earn a total of  17.00  from holding Equillium or generate 28.33% return on investment over 90 days.

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

Equillium  vs.  Cognition Therapeutics

Equillium

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

Cognition Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognition Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Equillium and Cognition Therapeutics

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

The idea behind Equillium and Cognition 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.