Correlation Between Unity Biotechnology and Eliem Therapeutics

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

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

Diversification Opportunities for Unity Biotechnology and Eliem Therapeutics

-0.4

Correlation Coefficient

Unity Biotechnology  Eliem Therapeutics

Very good diversification

The 3 months correlation between Unity and Eliem is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Unity Biotechnology and Eliem Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eliem Therapeutics and Unity Biotechnology 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 Unity Biotechnology are associated (or correlated) with Eliem Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eliem Therapeutics has no effect on the direction of Unity Biotechnology i.e., Unity Biotechnology and Eliem Therapeutics go up and down completely randomly.

Pair Corralation between Unity Biotechnology and Eliem Therapeutics

Considering the 90-day investment horizon Unity Biotechnology is not expected to generate positive returns. However, Unity Biotechnology is 2.35 times less risky than Eliem Therapeutics. It waists most of its returns potential to compensate for thr risk taken. Eliem Therapeutics is generating about -0.07 per unit of risk. If you would invest  145.00  in Unity Biotechnology on July 19, 2024 and sell it today you would lose (3.00) from holding Unity Biotechnology or give up 2.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	87.5%
Values	Daily Returns

Unity Biotechnology  vs.  Eliem Therapeutics

Unity Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Unity Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental drivers, Unity Biotechnology is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Eliem Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Unity Biotechnology and Eliem Therapeutics

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

The idea behind Unity Biotechnology and Eliem 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.