Correlation Between Mirum Pharmaceuticals and RAPT Therapeutics

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

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

Diversification Opportunities for Mirum Pharmaceuticals and RAPT Therapeutics

-0.29

Correlation Coefficient

Mirum Pharmaceuticals  RAPT Therapeutics

Very good diversification

The 3 months correlation between Mirum and RAPT is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Mirum Pharmaceuticals and RAPT Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAPT Therapeutics and Mirum Pharmaceuticals 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 Mirum Pharmaceuticals are associated (or correlated) with RAPT Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAPT Therapeutics has no effect on the direction of Mirum Pharmaceuticals i.e., Mirum Pharmaceuticals and RAPT Therapeutics go up and down completely randomly.

Pair Corralation between Mirum Pharmaceuticals and RAPT Therapeutics

Given the investment horizon of 90 days Mirum Pharmaceuticals is expected to generate 0.5 times more return on investment than RAPT Therapeutics. However, Mirum Pharmaceuticals is 1.99 times less risky than RAPT Therapeutics. It trades about 0.08 of its potential returns per unit of risk. RAPT Therapeutics is currently generating about 0.0 per unit of risk. If you would invest  4,156  in Mirum Pharmaceuticals on December 27, 2024 and sell it today you would earn a total of  472.00  from holding Mirum Pharmaceuticals or generate 11.36% return on investment over 90 days.

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

Mirum Pharmaceuticals  vs.  RAPT Therapeutics

Mirum Pharmaceuticals

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Mirum Pharmaceuticals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Mirum Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

RAPT Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days RAPT Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, RAPT Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Mirum Pharmaceuticals and RAPT Therapeutics

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

The idea behind Mirum Pharmaceuticals and RAPT 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.