Correlation Between Dupont Denemours and Mustang Bio

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

Diversification Opportunities for Dupont Denemours and Mustang Bio

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Dupont and Mustang is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Dupont Denemours and Mustang Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mustang Bio and Dupont Denemours 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 Dupont Denemours 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 Dupont Denemours i.e., Dupont Denemours and Mustang Bio go up and down completely randomly.

Pair Corralation between Dupont Denemours and Mustang Bio

Allowing for the 90-day total investment horizon Dupont Denemours is expected to generate 2.79 times less return on investment than Mustang Bio. But when comparing it to its historical volatility, Dupont Denemours is 3.96 times less risky than Mustang Bio. It trades about 0.19 of its potential returns per unit of risk. Mustang Bio is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  60.00  in Mustang Bio on May 11, 2022 and sell it today you would earn a total of  10.00  from holding Mustang Bio or generate 16.67% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Dupont Denemours  vs.  Mustang Bio

 Performance (%) 
       Timeline  
Dupont Denemours 
Dupont Performance
0 of 100
Over the last 90 days Dupont Denemours has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental indicators, Dupont Denemours is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Dupont Price Channel

Mustang Bio 
Mustang Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Mustang Bio are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Mustang Bio disclosed solid returns over the last few months and may actually be approaching a breakup point.

Mustang Price Channel

Dupont Denemours and Mustang Bio Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dupont Denemours and Mustang Bio

The main advantage of trading using opposite Dupont Denemours and Mustang Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont Denemours 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 Dupont Denemours 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

Pair trading matchups for 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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