Correlation Between Allena Pharmaceuticals and US Bancorp

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Can any of the company-specific risk be diversified away by investing in both Allena Pharmaceuticals and US Bancorp 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 Allena Pharmaceuticals and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Allena Pharmaceuticals and US Bancorp, you can compare the effects of market volatilities on Allena Pharmaceuticals and US Bancorp 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 Allena Pharmaceuticals with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Allena Pharmaceuticals and US Bancorp.

Diversification Opportunities for Allena Pharmaceuticals and US Bancorp

-0.41
  Correlation Coefficient

Very good diversification

The 3 months correlation between Allena and US Bancorp is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Allena Pharmaceuticals and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and Allena Pharmaceuticals 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 Allena Pharmaceuticals are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Allena Pharmaceuticals i.e., Allena Pharmaceuticals and US Bancorp go up and down completely randomly.

Pair Corralation between Allena Pharmaceuticals and US Bancorp

Given the investment horizon of 90 days Allena Pharmaceuticals is expected to under-perform the US Bancorp. In addition to that, Allena Pharmaceuticals is 4.79 times more volatile than US Bancorp. It trades about -0.02 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.05 per unit of volatility. If you would invest  3,322  in US Bancorp on May 12, 2022 and sell it today you would earn a total of  1,465  from holding US Bancorp or generate 44.1% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Allena Pharmaceuticals  vs.  US Bancorp

 Performance (%) 
       Timeline  
Allena Pharmaceuticals 
Allena Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Allena Pharmaceuticals are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Allena Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Allena Price Channel

US Bancorp 
US Bancorp Performance
0 of 100
Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, US Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

US Bancorp Price Channel

Allena Pharmaceuticals and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Allena Pharmaceuticals and US Bancorp

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

Allena Pharmaceuticals

Pair trading matchups for Allena Pharmaceuticals

The idea behind Allena Pharmaceuticals and US Bancorp 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.
Check out your portfolio center. 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.

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