Correlation Between Lyra Therapeutics and Soleno Therapeutics

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

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

Diversification Opportunities for Lyra Therapeutics and Soleno Therapeutics

0.54

Correlation Coefficient

Lyra Therapeutics  Soleno Therapeutics

Very weak diversification

The 3 months correlation between Lyra and Soleno is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Lyra Therapeutics and Soleno Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soleno Therapeutics and Lyra Therapeutics 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 Lyra Therapeutics are associated (or correlated) with Soleno Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soleno Therapeutics has no effect on the direction of Lyra Therapeutics i.e., Lyra Therapeutics and Soleno Therapeutics go up and down completely randomly.

Pair Corralation between Lyra Therapeutics and Soleno Therapeutics

Given the investment horizon of 90 days Lyra Therapeutics is expected to under-perform the Soleno Therapeutics. In addition to that, Lyra Therapeutics is 2.09 times more volatile than Soleno Therapeutics. It trades about -0.07 of its total potential returns per unit of risk. Soleno Therapeutics is currently generating about 0.05 per unit of volatility. If you would invest  3,550  in Soleno Therapeutics on October 5, 2024 and sell it today you would earn a total of  1,086  from holding Soleno Therapeutics or generate 30.59% return on investment over 90 days.

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

Lyra Therapeutics  vs.  Soleno Therapeutics

Lyra Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

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

Soleno Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Lyra Therapeutics and Soleno Therapeutics

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

The idea behind Lyra Therapeutics and Soleno 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.