Correlation Between Equillium and Lyra Therapeutics

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

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

Diversification Opportunities for Equillium and Lyra Therapeutics

0.57

Correlation Coefficient

Equillium  Lyra Therapeutics

Very weak diversification

The 3 months correlation between Equillium and Lyra is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Lyra Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyra 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 Lyra Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyra Therapeutics has no effect on the direction of Equillium i.e., Equillium and Lyra Therapeutics go up and down completely randomly.

Pair Corralation between Equillium and Lyra Therapeutics

Allowing for the 90-day total investment horizon Equillium is expected to generate 0.89 times more return on investment than Lyra Therapeutics. However, Equillium is 1.12 times less risky than Lyra Therapeutics. It trades about -0.04 of its potential returns per unit of risk. Lyra Therapeutics is currently generating about -0.09 per unit of risk. If you would invest  271.00  in Equillium on December 2, 2024 and sell it today you would lose (195.00) from holding Equillium or give up 71.96% of portfolio value over 90 days.

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

Equillium  vs.  Lyra Therapeutics

Equillium

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 3 (%) 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.

Lyra Therapeutics

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lyra Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Lyra Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Equillium and Lyra Therapeutics

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

The idea behind Equillium and Lyra 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.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.