Correlation Between Biomea Fusion and Homology Medicines

Can any of the company-specific risk be diversified away by investing in both Biomea Fusion and Homology Medicines 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 Homology Medicines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Biomea Fusion and Homology Medicines, you can compare the effects of market volatilities on Biomea Fusion and Homology Medicines 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 Homology Medicines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biomea Fusion and Homology Medicines.

Diversification Opportunities for Biomea Fusion and Homology Medicines

0.41

Correlation Coefficient

Biomea Fusion  Homology Medicines

Very weak diversification

The 3 months correlation between Biomea and Homology is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Biomea Fusion and Homology Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Homology Medicines 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 Homology Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Homology Medicines has no effect on the direction of Biomea Fusion i.e., Biomea Fusion and Homology Medicines go up and down completely randomly.

Pair Corralation between Biomea Fusion and Homology Medicines

If you would invest  729.00  in Biomea Fusion on September 3, 2024 and sell it today you would lose (5.00) from holding Biomea Fusion or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Biomea Fusion  vs.  Homology Medicines

Biomea Fusion

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Biomea Fusion are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Biomea Fusion may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Homology Medicines

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Biomea Fusion and Homology Medicines

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

The idea behind Biomea Fusion and Homology Medicines 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.