Correlation Between Equillium and Mustang Bio

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

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

Diversification Opportunities for Equillium and Mustang Bio

-0.4

Correlation Coefficient

Equillium  Mustang Bio

Very good diversification

The 3 months correlation between Equillium and Mustang is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Mustang Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustang 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 Mustang Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustang Bio has no effect on the direction of Equillium i.e., Equillium and Mustang Bio go up and down completely randomly.

Pair Corralation between Equillium and Mustang Bio

Allowing for the 90-day total investment horizon Equillium is expected to generate 0.69 times more return on investment than Mustang Bio. However, Equillium is 1.44 times less risky than Mustang Bio. It trades about 0.05 of its potential returns per unit of risk. Mustang Bio is currently generating about -0.23 per unit of risk. If you would invest  71.00  in Equillium on December 2, 2024 and sell it today you would earn a total of  5.00  from holding Equillium or generate 7.04% 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.  Mustang Bio

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.

Mustang Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mustang Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Equillium and Mustang Bio

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

The idea behind Equillium and Mustang 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.