Correlation Between Spero Therapeutics and Armata Pharmaceuticals

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

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

Diversification Opportunities for Spero Therapeutics and Armata Pharmaceuticals

0.33

Correlation Coefficient

Spero Therapeutics  Armata Pharmaceuticals

Weak diversification

The 3 months correlation between Spero and Armata is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Spero Therapeutics and Armata Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Armata Pharmaceuticals and Spero 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 Spero Therapeutics are associated (or correlated) with Armata Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Armata Pharmaceuticals has no effect on the direction of Spero Therapeutics i.e., Spero Therapeutics and Armata Pharmaceuticals go up and down completely randomly.

Pair Corralation between Spero Therapeutics and Armata Pharmaceuticals

Given the investment horizon of 90 days Spero Therapeutics is expected to generate 0.46 times more return on investment than Armata Pharmaceuticals. However, Spero Therapeutics is 2.19 times less risky than Armata Pharmaceuticals. It trades about -0.15 of its potential returns per unit of risk. Armata Pharmaceuticals is currently generating about -0.1 per unit of risk. If you would invest  114.00  in Spero Therapeutics on September 17, 2024 and sell it today you would lose (7.00) from holding Spero Therapeutics or give up 6.14% of portfolio value over 90 days.

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

Spero Therapeutics  vs.  Armata Pharmaceuticals

Spero Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Spero Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Armata Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Armata Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Armata Pharmaceuticals is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Spero Therapeutics and Armata Pharmaceuticals

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

The idea behind Spero Therapeutics and Armata Pharmaceuticals 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.