Correlation Between Biomea Fusion and Day One

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

Diversification Opportunities for Biomea Fusion and Day One

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between Biomea and Day is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Biomea Fusion and Day One Biopharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Day One Biopharmaceu and Biomea Fusion 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 Biomea Fusion are associated (or correlated) with Day One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Day One Biopharmaceu has no effect on the direction of Biomea Fusion i.e., Biomea Fusion and Day One go up and down completely randomly.

Pair Corralation between Biomea Fusion and Day One

Given the investment horizon of 90 days Biomea Fusion is expected to under-perform the Day One. In addition to that, Biomea Fusion is 5.02 times more volatile than Day One Biopharmaceuticals. It trades about -0.17 of its total potential returns per unit of risk. Day One Biopharmaceuticals is currently generating about -0.27 per unit of volatility. If you would invest  1,322  in Day One Biopharmaceuticals on October 11, 2024 and sell it today you would lose (102.00) from holding Day One Biopharmaceuticals or give up 7.72% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy95.24%
ValuesDaily Returns

Biomea Fusion  vs.  Day One Biopharmaceuticals

 Performance 
       Timeline  
Biomea Fusion 

Risk-Adjusted Performance

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Weak
 
Strong
Very Weak
Over the last 90 days Biomea Fusion 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 technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Day One Biopharmaceu 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Day One Biopharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak 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.

Biomea Fusion and Day One Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Biomea Fusion and Day One

The main advantage of trading using opposite Biomea Fusion and Day One positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biomea Fusion position performs unexpectedly, Day One 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 Day One will offset losses from the drop in Day One's long position.
The idea behind Biomea Fusion and Day One Biopharmaceuticals 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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