Correlation Between Protagonist Therapeutics and Avidity Biosciences

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

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

Diversification Opportunities for Protagonist Therapeutics and Avidity Biosciences

0.66

Correlation Coefficient

Protagonist Therapeutics  Avidity Biosciences

Poor diversification

The 3 months correlation between Protagonist and Avidity is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Protagonist Therapeutics and Avidity Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avidity Biosciences and Protagonist 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 Protagonist Therapeutics are associated (or correlated) with Avidity Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avidity Biosciences has no effect on the direction of Protagonist Therapeutics i.e., Protagonist Therapeutics and Avidity Biosciences go up and down completely randomly.

Pair Corralation between Protagonist Therapeutics and Avidity Biosciences

Given the investment horizon of 90 days Protagonist Therapeutics is expected to generate 0.88 times more return on investment than Avidity Biosciences. However, Protagonist Therapeutics is 1.14 times less risky than Avidity Biosciences. It trades about 0.09 of its potential returns per unit of risk. Avidity Biosciences is currently generating about 0.04 per unit of risk. If you would invest  1,078  in Protagonist Therapeutics on September 23, 2024 and sell it today you would earn a total of  3,071  from holding Protagonist Therapeutics or generate 284.88% return on investment over 90 days.

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

Protagonist Therapeutics  vs.  Avidity Biosciences

Protagonist Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Protagonist Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Avidity Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avidity Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Protagonist Therapeutics and Avidity Biosciences

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

The idea behind Protagonist Therapeutics and Avidity Biosciences 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.