Correlation Between Passage Bio and RAPT Therapeutics

Can any of the company-specific risk be diversified away by investing in both Passage Bio 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 Passage Bio and RAPT 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 RAPT Therapeutics, you can compare the effects of market volatilities on Passage Bio 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 Passage Bio with a short position of RAPT Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Passage Bio and RAPT Therapeutics.

Diversification Opportunities for Passage Bio and RAPT Therapeutics

0.43

Correlation Coefficient

Passage Bio  RAPT Therapeutics

Very weak diversification

The 3 months correlation between Passage and RAPT is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Passage Bio and RAPT Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAPT 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 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 Passage Bio i.e., Passage Bio and RAPT Therapeutics go up and down completely randomly.

Pair Corralation between Passage Bio and RAPT Therapeutics

Given the investment horizon of 90 days Passage Bio is expected to under-perform the RAPT Therapeutics. In addition to that, Passage Bio is 1.54 times more volatile than RAPT Therapeutics. It trades about -0.04 of its total potential returns per unit of risk. RAPT Therapeutics is currently generating about 0.0 per unit of volatility. If you would invest  169.00  in RAPT Therapeutics on December 27, 2024 and sell it today you would lose (13.00) from holding RAPT Therapeutics or give up 7.69% of portfolio value over 90 days.

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

Passage Bio  vs.  RAPT Therapeutics

Passage Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Passage Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 Passage Bio and RAPT Therapeutics

The main advantage of trading using opposite Passage Bio and RAPT Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Passage Bio 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 Passage Bio 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.