Correlation Between Pliant Therapeutics and Immunovant

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

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

Diversification Opportunities for Pliant Therapeutics and Immunovant

0.24

Correlation Coefficient

Pliant Therapeutics  Immunovant

Modest diversification

The 3 months correlation between Pliant and Immunovant is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Pliant Therapeutics and Immunovant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immunovant and Pliant Therapeutics 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 Pliant Therapeutics are associated (or correlated) with Immunovant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immunovant has no effect on the direction of Pliant Therapeutics i.e., Pliant Therapeutics and Immunovant go up and down completely randomly.

Pair Corralation between Pliant Therapeutics and Immunovant

Given the investment horizon of 90 days Pliant Therapeutics is expected to under-perform the Immunovant. But the stock apears to be less risky and, when comparing its historical volatility, Pliant Therapeutics is 1.67 times less risky than Immunovant. The stock trades about -0.02 of its potential returns per unit of risk. The Immunovant is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,125  in Immunovant on August 31, 2024 and sell it today you would earn a total of  695.00  from holding Immunovant or generate 32.71% return on investment over 90 days.

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

Pliant Therapeutics  vs.  Immunovant

Pliant Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Pliant Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Pliant Therapeutics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Immunovant

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Pliant Therapeutics and Immunovant

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

The idea behind Pliant Therapeutics and Immunovant 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.