Correlation Between Beam Therapeutics and Adaptive Biotechnologies

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

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

Diversification Opportunities for Beam Therapeutics and Adaptive Biotechnologies

0.21

Correlation Coefficient

Beam Therapeutics  Adaptive Biotechnologies

Modest diversification

The 3 months correlation between Beam and Adaptive is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Beam Therapeutics and Adaptive Biotechnologies Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adaptive Biotechnologies and Beam 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 Beam Therapeutics are associated (or correlated) with Adaptive Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adaptive Biotechnologies has no effect on the direction of Beam Therapeutics i.e., Beam Therapeutics and Adaptive Biotechnologies go up and down completely randomly.

Pair Corralation between Beam Therapeutics and Adaptive Biotechnologies

Given the investment horizon of 90 days Beam Therapeutics is expected to under-perform the Adaptive Biotechnologies. But the stock apears to be less risky and, when comparing its historical volatility, Beam Therapeutics is 1.17 times less risky than Adaptive Biotechnologies. The stock trades about -0.03 of its potential returns per unit of risk. The Adaptive Biotechnologies Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  611.00  in Adaptive Biotechnologies Corp on December 29, 2024 and sell it today you would earn a total of  211.00  from holding Adaptive Biotechnologies Corp or generate 34.53% return on investment over 90 days.

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

Beam Therapeutics  vs.  Adaptive Biotechnologies Corp

Beam Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beam Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Adaptive Biotechnologies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adaptive Biotechnologies Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively abnormal basic indicators, Adaptive Biotechnologies unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beam Therapeutics and Adaptive Biotechnologies

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

The idea behind Beam Therapeutics and Adaptive Biotechnologies Corp 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.