Correlation Between Equillium and Northwest Biotherapeutics

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

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

Diversification Opportunities for Equillium and Northwest Biotherapeutics

0.05

Correlation Coefficient

Equillium  Northwest Biotherapeutics

Significant diversification

The 3 months correlation between Equillium and Northwest is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Northwest Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Biotherapeutics 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 Northwest Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Biotherapeutics has no effect on the direction of Equillium i.e., Equillium and Northwest Biotherapeutics go up and down completely randomly.

Pair Corralation between Equillium and Northwest Biotherapeutics

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.93 times more return on investment than Northwest Biotherapeutics. However, Equillium is 1.93 times more volatile than Northwest Biotherapeutics. It trades about 0.0 of its potential returns per unit of risk. Northwest Biotherapeutics is currently generating about -0.01 per unit of risk. If you would invest  86.00  in Equillium on September 16, 2024 and sell it today you would lose (16.00) from holding Equillium or give up 18.6% of portfolio value over 90 days.

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

Equillium  vs.  Northwest Biotherapeutics

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.

Northwest Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northwest Biotherapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Northwest Biotherapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Equillium and Northwest Biotherapeutics

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

The idea behind Equillium and Northwest Biotherapeutics 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 Commodity Directory module to find actively traded commodities issued by global exchanges.