Correlation Between Eliem Therapeutics and FibroGen

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

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

Diversification Opportunities for Eliem Therapeutics and FibroGen

-0.59

Correlation Coefficient

Eliem Therapeutics  FibroGen

Excellent diversification

The 3 months correlation between Eliem and FibroGen is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Eliem Therapeutics and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen and Eliem 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 Eliem Therapeutics are associated (or correlated) with FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of Eliem Therapeutics i.e., Eliem Therapeutics and FibroGen go up and down completely randomly.

Pair Corralation between Eliem Therapeutics and FibroGen

Given the investment horizon of 90 days Eliem Therapeutics is expected to generate 4.72 times more return on investment than FibroGen. However, Eliem Therapeutics is 4.72 times more volatile than FibroGen. It trades about 0.38 of its potential returns per unit of risk. FibroGen is currently generating about -0.37 per unit of risk. If you would invest  269.00  in Eliem Therapeutics on February 6, 2024 and sell it today you would earn a total of  644.50  from holding Eliem Therapeutics or generate 239.59% return on investment over 90 days.

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

Eliem Therapeutics  vs.  FibroGen

Eliem Therapeutics

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Eliem Therapeutics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Eliem Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

FibroGen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FibroGen has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Eliem Therapeutics and FibroGen

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

The idea behind Eliem Therapeutics and FibroGen 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.