Correlation Between Beam Therapeutics and Heron Therapeuti

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

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

Diversification Opportunities for Beam Therapeutics and Heron Therapeuti

-0.29

Correlation Coefficient

Beam Therapeutics  Heron Therapeuti

Very good diversification

The 3 months correlation between Beam and Heron is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Beam Therapeutics and Heron Therapeuti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heron Therapeuti 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 Heron Therapeuti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heron Therapeuti has no effect on the direction of Beam Therapeutics i.e., Beam Therapeutics and Heron Therapeuti go up and down completely randomly.

Pair Corralation between Beam Therapeutics and Heron Therapeuti

Given the investment horizon of 90 days Beam Therapeutics is expected to generate 2.29 times less return on investment than Heron Therapeuti. But when comparing it to its historical volatility, Beam Therapeutics is 2.15 times less risky than Heron Therapeuti. It trades about 0.2 of its potential returns per unit of risk. Heron Therapeuti is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  117.00  in Heron Therapeuti on September 19, 2024 and sell it today you would earn a total of  48.00  from holding Heron Therapeuti or generate 41.03% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Beam Therapeutics  vs.  Heron Therapeuti

Beam Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Beam Therapeutics are ranked lower than 4 (%) 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.

Heron Therapeuti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heron Therapeuti has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Heron Therapeuti is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Beam Therapeutics and Heron Therapeuti

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

The idea behind Beam Therapeutics and Heron Therapeuti 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 the Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..