Correlation Between Pulmatrix and Magenta Therapeutics

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

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

Diversification Opportunities for Pulmatrix and Magenta Therapeutics

0.56

Correlation Coefficient

Pulmatrix  Magenta Therapeutics

Very weak diversification

The 3 months correlation between Pulmatrix and Magenta is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Pulmatrix and Magenta Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magenta Therapeutics and Pulmatrix 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 Pulmatrix are associated (or correlated) with Magenta Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magenta Therapeutics has no effect on the direction of Pulmatrix i.e., Pulmatrix and Magenta Therapeutics go up and down completely randomly.

Pair Corralation between Pulmatrix and Magenta Therapeutics

Given the investment horizon of 90 days Pulmatrix is expected to generate 0.72 times more return on investment than Magenta Therapeutics. However, Pulmatrix is 1.39 times less risky than Magenta Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Magenta Therapeutics is currently generating about 0.02 per unit of risk. If you would invest  381.00  in Pulmatrix on September 3, 2024 and sell it today you would earn a total of  283.00  from holding Pulmatrix or generate 74.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	30.91%
Values	Daily Returns

Pulmatrix  vs.  Magenta Therapeutics

Pulmatrix

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Pulmatrix are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Pulmatrix displayed solid returns over the last few months and may actually be approaching a breakup point.

Magenta Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magenta Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Magenta Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Pulmatrix and Magenta Therapeutics

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

The idea behind Pulmatrix and Magenta 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.