Correlation Between Beam Therapeutics and HCW Biologics

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

By analyzing existing cross correlation between Beam Therapeutics and HCW Biologics, you can compare the effects of market volatilities on Beam Therapeutics and HCW Biologics 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 HCW Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Beam Therapeutics and HCW Biologics.

Diversification Opportunities for Beam Therapeutics and HCW Biologics

-0.08

Correlation Coefficient

Beam Therapeutics  HCW Biologics

Good diversification

The 3 months correlation between Beam and HCW is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Beam Therapeutics and HCW Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCW Biologics 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 HCW Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCW Biologics has no effect on the direction of Beam Therapeutics i.e., Beam Therapeutics and HCW Biologics go up and down completely randomly.

Pair Corralation between Beam Therapeutics and HCW Biologics

Given the investment horizon of 90 days Beam Therapeutics is expected to under-perform the HCW Biologics. But the stock apears to be less risky and, when comparing its historical volatility, Beam Therapeutics is 3.72 times less risky than HCW Biologics. The stock trades about 0.0 of its potential returns per unit of risk. The HCW Biologics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  200.00  in HCW Biologics on September 5, 2024 and sell it today you would lose (154.00) from holding HCW Biologics or give up 77.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Beam Therapeutics  vs.  HCW Biologics

Beam Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beam Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Beam Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

HCW Biologics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HCW Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Beam Therapeutics and HCW Biologics

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

The idea behind Beam Therapeutics and HCW Biologics 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.