Correlation Between NGM Biopharmaceutica and Passage Bio

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

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

Diversification Opportunities for NGM Biopharmaceutica and Passage Bio

0.55

Correlation Coefficient

NGM Biopharmaceutica  Passage Bio

Very weak diversification

The 3 months correlation between NGM and Passage is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding NGM Biopharmaceuticals and Passage Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Passage Bio and NGM Biopharmaceutica 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 NGM Biopharmaceuticals 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 NGM Biopharmaceutica i.e., NGM Biopharmaceutica and Passage Bio go up and down completely randomly.

Pair Corralation between NGM Biopharmaceutica and Passage Bio

If you would invest  70.00  in Passage Bio on August 30, 2024 and sell it today you would lose (3.34) from holding Passage Bio or give up 4.77% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

NGM Biopharmaceuticals  vs.  Passage Bio

NGM Biopharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Passage Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Passage Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Passage Bio may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with NGM Biopharmaceutica and Passage Bio

The main advantage of trading using opposite NGM Biopharmaceutica and Passage Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGM Biopharmaceutica 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 NGM Biopharmaceuticals 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.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.