Correlation Between Dyadic International and Passage Bio

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

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

Diversification Opportunities for Dyadic International and Passage Bio

0.78

Correlation Coefficient

Dyadic International  Passage Bio

Poor diversification

The 3 months correlation between Dyadic and Passage is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Dyadic International and Passage Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Passage Bio and Dyadic International 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 Dyadic International are associated (or correlated) with Passage Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Passage Bio has no effect on the direction of Dyadic International i.e., Dyadic International and Passage Bio go up and down completely randomly.

Pair Corralation between Dyadic International and Passage Bio

Given the investment horizon of 90 days Dyadic International is expected to under-perform the Passage Bio. But the stock apears to be less risky and, when comparing its historical volatility, Dyadic International is 1.42 times less risky than Passage Bio. The stock trades about -0.01 of its potential returns per unit of risk. The Passage Bio is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Passage Bio on July 23, 2024 and sell it today you would lose (6.00) from holding Passage Bio or give up 9.38% of portfolio value over 90 days.

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

Dyadic International  vs.  Passage Bio

Dyadic International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dyadic International has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Passage Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Passage Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Dyadic International and Passage Bio

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

The idea behind Dyadic International and Passage Bio 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.