Correlation Between Equillium and Palatin Technologies

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

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

Diversification Opportunities for Equillium and Palatin Technologies

0.23

Correlation Coefficient

Equillium  Palatin Technologies

Modest diversification

The 3 months correlation between Equillium and Palatin is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Palatin Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Palatin Technologies 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 Palatin Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Palatin Technologies has no effect on the direction of Equillium i.e., Equillium and Palatin Technologies go up and down completely randomly.

Pair Corralation between Equillium and Palatin Technologies

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.18 times more return on investment than Palatin Technologies. However, Equillium is 1.18 times more volatile than Palatin Technologies. It trades about 0.03 of its potential returns per unit of risk. Palatin Technologies is currently generating about -0.01 per unit of risk. If you would invest  86.00  in Equillium on October 7, 2024 and sell it today you would lose (8.00) from holding Equillium or give up 9.3% of portfolio value over 90 days.

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

Equillium  vs.  Palatin Technologies

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.

Palatin Technologies

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Palatin Technologies are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Palatin Technologies displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equillium and Palatin Technologies

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

The idea behind Equillium and Palatin Technologies 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.