Correlation Between Brickell Biotech and Mustang Bio

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

Diversification Opportunities for Brickell Biotech and Mustang Bio

0.69
  Correlation Coefficient

Poor diversification

The 3 months correlation between Brickell and Mustang is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Brickell Biotech and Mustang Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustang Bio and Brickell Biotech 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 Brickell Biotech are associated (or correlated) with Mustang Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mustang Bio has no effect on the direction of Brickell Biotech i.e., Brickell Biotech and Mustang Bio go up and down completely randomly.

Pair Corralation between Brickell Biotech and Mustang Bio

Considering the 90-day investment horizon Brickell Biotech is expected to generate 1.5 times more return on investment than Mustang Bio. However, Brickell Biotech is 1.5 times more volatile than Mustang Bio. It trades about -0.05 of its potential returns per unit of risk. Mustang Bio is currently generating about -0.11 per unit of risk. If you would invest  86.00  in Brickell Biotech on April 1, 2022 and sell it today you would lose (69.00)  from holding Brickell Biotech or give up 80.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Brickell Biotech  vs.  Mustang Bio

 Performance (%) 
      Timeline 
Brickell Biotech 
Brickell Performance
0 of 100
Over the last 90 days Brickell Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite sluggish performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in July 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Structure and Payout Changes

Last Split Factor
1:7
Dividend Date
2019-09-03
Last Split Date
2019-09-03

Brickell Price Channel

Mustang Bio 
Mustang Performance
0 of 100
Over the last 90 days Mustang 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 forward indicators remain quite persistent which may send shares a bit higher in July 2022. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Mustang Price Channel

Brickell Biotech and Mustang Bio Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Brickell Biotech and Mustang Bio

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

Mustang Bio

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The effect of pair diversification on risk is to reduce it, but we should note this doesn't apply to all risk types. When we trade pairs against Mustang Bio as a counterpart, there is always some inherent risk that will never be diversified away no matter what. This volatility limits the effect of tactical diversification using pair trading. Mustang Bio's systematic risk is the inherent uncertainty of the entire market, and therefore cannot be mitigated even by pair-trading it against the equity that is not highly correlated to it. On the other hand, Mustang Bio's unsystematic risk describes the types of risk that we can protect against, at least to some degree, by selecting a matching pair that is not perfectly correlated to Mustang Bio.
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.

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