Correlation Between Equillium and Eledon Pharmaceuticals

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

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

Diversification Opportunities for Equillium and Eledon Pharmaceuticals

-0.48

Correlation Coefficient

Equillium  Eledon Pharmaceuticals

Very good diversification

The 3 months correlation between Equillium and Eledon is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Eledon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eledon Pharmaceuticals 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 Eledon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eledon Pharmaceuticals has no effect on the direction of Equillium i.e., Equillium and Eledon Pharmaceuticals go up and down completely randomly.

Pair Corralation between Equillium and Eledon Pharmaceuticals

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.8 times less return on investment than Eledon Pharmaceuticals. In addition to that, Equillium is 1.52 times more volatile than Eledon Pharmaceuticals. It trades about 0.04 of its total potential returns per unit of risk. Eledon Pharmaceuticals is currently generating about 0.11 per unit of volatility. If you would invest  247.00  in Eledon Pharmaceuticals on October 4, 2024 and sell it today you would earn a total of  165.00  from holding Eledon Pharmaceuticals or generate 66.8% return on investment over 90 days.

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

Equillium  vs.  Eledon Pharmaceuticals

Equillium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Eledon Pharmaceuticals

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Eledon Pharmaceuticals are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Eledon Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equillium and Eledon Pharmaceuticals

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

The idea behind Equillium and Eledon 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.