Correlation Between Mind Medicine and Signature Bank

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Can any of the company-specific risk be diversified away by investing in both Mind Medicine and Signature Bank 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 Mind Medicine and Signature Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mind Medicine and Signature Bank, you can compare the effects of market volatilities on Mind Medicine and Signature Bank 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 Mind Medicine with a short position of Signature Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mind Medicine and Signature Bank.

Diversification Opportunities for Mind Medicine and Signature Bank

-0.59
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Mind and Signature is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Mind Medicine and Signature Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Signature Bank and Mind Medicine 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 Mind Medicine are associated (or correlated) with Signature Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Signature Bank has no effect on the direction of Mind Medicine i.e., Mind Medicine and Signature Bank go up and down completely randomly.

Pair Corralation between Mind Medicine and Signature Bank

Given the investment horizon of 90 days Mind Medicine is expected to generate 9.11 times less return on investment than Signature Bank. But when comparing it to its historical volatility, Mind Medicine is 5.96 times less risky than Signature Bank. It trades about 0.07 of its potential returns per unit of risk. Signature Bank is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,558  in Signature Bank on September 23, 2024 and sell it today you would lose (1,556) from holding Signature Bank or give up 99.89% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy27.77%
ValuesDaily Returns

Mind Medicine  vs.  Signature Bank

 Performance 
       Timeline  
Mind Medicine 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Mind Medicine are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady primary indicators, Mind Medicine exhibited solid returns over the last few months and may actually be approaching a breakup point.
Signature Bank 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Signature Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Signature Bank is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Mind Medicine and Signature Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Mind Medicine and Signature Bank

The main advantage of trading using opposite Mind Medicine and Signature Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mind Medicine position performs unexpectedly, Signature Bank 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 Signature Bank will offset losses from the drop in Signature Bank's long position.
The idea behind Mind Medicine and Signature Bank 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.

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