Correlation Between Mustang Bio and Pliant Therapeutics

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

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

Diversification Opportunities for Mustang Bio and Pliant Therapeutics

0.21

Correlation Coefficient

Mustang Bio  Pliant Therapeutics

Modest diversification

The 3 months correlation between Mustang and Pliant is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Mustang Bio and Pliant Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pliant Therapeutics and Mustang Bio 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 Mustang Bio are associated (or correlated) with Pliant Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pliant Therapeutics has no effect on the direction of Mustang Bio i.e., Mustang Bio and Pliant Therapeutics go up and down completely randomly.

Pair Corralation between Mustang Bio and Pliant Therapeutics

Given the investment horizon of 90 days Mustang Bio is expected to generate 1.91 times more return on investment than Pliant Therapeutics. However, Mustang Bio is 1.91 times more volatile than Pliant Therapeutics. It trades about 0.12 of its potential returns per unit of risk. Pliant Therapeutics is currently generating about -0.18 per unit of risk. If you would invest  19.00  in Mustang Bio on October 9, 2024 and sell it today you would earn a total of  2.00  from holding Mustang Bio or generate 10.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.0%
Values	Daily Returns

Mustang Bio  vs.  Pliant Therapeutics

Mustang Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Mustang Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Mustang Bio is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pliant Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pliant Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Pliant Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Mustang Bio and Pliant Therapeutics

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

The idea behind Mustang Bio and Pliant 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.