Correlation Between Pliant Therapeutics and Acumen Pharmaceuticals

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

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

Diversification Opportunities for Pliant Therapeutics and Acumen Pharmaceuticals

0.67

Correlation Coefficient

Pliant Therapeutics  Acumen Pharmaceuticals

Poor diversification

The 3 months correlation between Pliant and Acumen is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Pliant Therapeutics and Acumen Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Acumen Pharmaceuticals and Pliant 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 Pliant Therapeutics are associated (or correlated) with Acumen Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Acumen Pharmaceuticals has no effect on the direction of Pliant Therapeutics i.e., Pliant Therapeutics and Acumen Pharmaceuticals go up and down completely randomly.

Pair Corralation between Pliant Therapeutics and Acumen Pharmaceuticals

Given the investment horizon of 90 days Pliant Therapeutics is expected to generate 0.54 times more return on investment than Acumen Pharmaceuticals. However, Pliant Therapeutics is 1.86 times less risky than Acumen Pharmaceuticals. It trades about -0.11 of its potential returns per unit of risk. Acumen Pharmaceuticals is currently generating about -0.18 per unit of risk. If you would invest  1,472  in Pliant Therapeutics on August 30, 2024 and sell it today you would lose (119.00) from holding Pliant Therapeutics or give up 8.08% of portfolio value over 90 days.

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

Pliant Therapeutics  vs.  Acumen Pharmaceuticals

Pliant Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Pliant Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Pliant Therapeutics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Acumen Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Acumen Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Pliant Therapeutics and Acumen Pharmaceuticals

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

The idea behind Pliant Therapeutics and Acumen 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.