Correlation Between Equillium and Precision BioSciences

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

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

Diversification Opportunities for Equillium and Precision BioSciences

0.38

Correlation Coefficient

Equillium  Precision BioSciences

Weak diversification

The 3 months correlation between Equillium and Precision is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Precision BioSciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision BioSciences 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 Precision BioSciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision BioSciences has no effect on the direction of Equillium i.e., Equillium and Precision BioSciences go up and down completely randomly.

Pair Corralation between Equillium and Precision BioSciences

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.01 times more return on investment than Precision BioSciences. However, Equillium is 1.01 times more volatile than Precision BioSciences. It trades about 0.09 of its potential returns per unit of risk. Precision BioSciences is currently generating about 0.08 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 Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Equillium  vs.  Precision BioSciences

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.

Precision BioSciences

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Precision BioSciences are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Precision BioSciences disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equillium and Precision BioSciences

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

The idea behind Equillium and Precision BioSciences 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.