Correlation Between Passage Bio and Fulcrum Therapeutics

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

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

Diversification Opportunities for Passage Bio and Fulcrum Therapeutics

0.45

Correlation Coefficient

Passage Bio  Fulcrum Therapeutics

Very weak diversification

The 3 months correlation between Passage and Fulcrum is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and Fulcrum Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fulcrum Therapeutics and Passage 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 Passage Bio are associated (or correlated) with Fulcrum Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fulcrum Therapeutics has no effect on the direction of Passage Bio i.e., Passage Bio and Fulcrum Therapeutics go up and down completely randomly.

Pair Corralation between Passage Bio and Fulcrum Therapeutics

Given the investment horizon of 90 days Passage Bio is expected to under-perform the Fulcrum Therapeutics. In addition to that, Passage Bio is 2.2 times more volatile than Fulcrum Therapeutics. It trades about -0.03 of its total potential returns per unit of risk. Fulcrum Therapeutics is currently generating about 0.12 per unit of volatility. If you would invest  405.00  in Fulcrum Therapeutics on October 11, 2024 and sell it today you would earn a total of  43.00  from holding Fulcrum Therapeutics or generate 10.62% return on investment over 90 days.

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

Passage Bio  vs.  Fulcrum Therapeutics

Passage Bio

Risk-Adjusted Performance

5 of 100

Insignificant

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

Fulcrum Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fulcrum Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain essential indicators, Fulcrum Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Passage Bio and Fulcrum Therapeutics

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

The idea behind Passage Bio and Fulcrum 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.