Correlation Between Equillium and CytomX Therapeutics

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

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

Diversification Opportunities for Equillium and CytomX Therapeutics

0.07

Correlation Coefficient

Equillium  CytomX Therapeutics

Significant diversification

The 3 months correlation between Equillium and CytomX is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and CytomX Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CytomX 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 CytomX Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CytomX Therapeutics has no effect on the direction of Equillium i.e., Equillium and CytomX Therapeutics go up and down completely randomly.

Pair Corralation between Equillium and CytomX Therapeutics

Allowing for the 90-day total investment horizon Equillium is expected to under-perform the CytomX Therapeutics. In addition to that, Equillium is 1.02 times more volatile than CytomX Therapeutics. It trades about -0.03 of its total potential returns per unit of risk. CytomX Therapeutics is currently generating about 0.12 per unit of volatility. If you would invest  104.00  in CytomX Therapeutics on September 12, 2024 and sell it today you would earn a total of  13.00  from holding CytomX Therapeutics or generate 12.5% return on investment over 90 days.

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

Equillium  vs.  CytomX Therapeutics

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

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

CytomX Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CytomX Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong primary indicators, CytomX Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Equillium and CytomX Therapeutics

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

The idea behind Equillium and CytomX 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.