Correlation Between Equillium and Gossamer Bio

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

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

Diversification Opportunities for Equillium and Gossamer Bio

0.45

Correlation Coefficient

Equillium  Gossamer Bio

Very weak diversification

The 3 months correlation between Equillium and Gossamer is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Gossamer Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gossamer Bio 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 Gossamer Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gossamer Bio has no effect on the direction of Equillium i.e., Equillium and Gossamer Bio go up and down completely randomly.

Pair Corralation between Equillium and Gossamer Bio

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.66 times more return on investment than Gossamer Bio. However, Equillium is 1.66 times more volatile than Gossamer Bio. It trades about 0.01 of its potential returns per unit of risk. Gossamer Bio is currently generating about 0.01 per unit of risk. If you would invest  93.00  in Equillium on October 7, 2024 and sell it today you would lose (15.00) from holding Equillium or give up 16.13% of portfolio value over 90 days.

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

Equillium  vs.  Gossamer Bio

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.

Gossamer Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gossamer Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Gossamer Bio is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Equillium and Gossamer Bio

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

The idea behind Equillium and Gossamer Bio 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.