Correlation Between Spero Therapeutics and Gain Therapeutics

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

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

Diversification Opportunities for Spero Therapeutics and Gain Therapeutics

0.15

Correlation Coefficient

Spero Therapeutics  Gain Therapeutics

Average diversification

The 3 months correlation between Spero and Gain is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Spero Therapeutics and Gain Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gain Therapeutics 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 Gain Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gain Therapeutics has no effect on the direction of Spero Therapeutics i.e., Spero Therapeutics and Gain Therapeutics go up and down completely randomly.

Pair Corralation between Spero Therapeutics and Gain Therapeutics

Given the investment horizon of 90 days Spero Therapeutics is expected to under-perform the Gain Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Spero Therapeutics is 3.02 times less risky than Gain Therapeutics. The stock trades about -0.22 of its potential returns per unit of risk. The Gain Therapeutics is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  185.00  in Gain Therapeutics on September 16, 2024 and sell it today you would lose (22.00) from holding Gain Therapeutics or give up 11.89% of portfolio value over 90 days.

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

Spero Therapeutics  vs.  Gain Therapeutics

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.

Gain Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Gain Therapeutics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Gain Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Spero Therapeutics and Gain Therapeutics

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

The idea behind Spero Therapeutics and Gain 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.