Correlation Between Lyell Immunopharma and Passage Bio

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

By analyzing existing cross correlation between Lyell Immunopharma and Passage Bio, you can compare the effects of market volatilities on Lyell Immunopharma and Passage 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 Lyell Immunopharma with a short position of Passage Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyell Immunopharma and Passage Bio.

Diversification Opportunities for Lyell Immunopharma and Passage Bio

0.39

Correlation Coefficient

Lyell Immunopharma  Passage Bio

Weak diversification

The 3 months correlation between Lyell and Passage is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lyell Immunopharma and Passage Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Passage Bio and Lyell Immunopharma 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 Lyell Immunopharma are associated (or correlated) with Passage Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Passage Bio has no effect on the direction of Lyell Immunopharma i.e., Lyell Immunopharma and Passage Bio go up and down completely randomly.

Pair Corralation between Lyell Immunopharma and Passage Bio

Given the investment horizon of 90 days Lyell Immunopharma is expected to under-perform the Passage Bio. In addition to that, Lyell Immunopharma is 1.04 times more volatile than Passage Bio. It trades about -0.06 of its total potential returns per unit of risk. Passage Bio is currently generating about 0.04 per unit of volatility. If you would invest  66.00  in Passage Bio on August 31, 2024 and sell it today you would earn a total of  1.00  from holding Passage Bio or generate 1.52% return on investment over 90 days.

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

Lyell Immunopharma  vs.  Passage Bio

Lyell Immunopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyell Immunopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Passage Bio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Passage Bio reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyell Immunopharma and Passage Bio

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

The idea behind Lyell Immunopharma and Passage 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.