Correlation Between Biomea Fusion and IGM Biosciences

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

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

Diversification Opportunities for Biomea Fusion and IGM Biosciences

0.42

Correlation Coefficient

Biomea Fusion  IGM Biosciences

Very weak diversification

The 3 months correlation between Biomea and IGM is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Biomea Fusion and IGM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Biosciences 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 IGM Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Biosciences has no effect on the direction of Biomea Fusion i.e., Biomea Fusion and IGM Biosciences go up and down completely randomly.

Pair Corralation between Biomea Fusion and IGM Biosciences

Given the investment horizon of 90 days Biomea Fusion is expected to generate 0.45 times more return on investment than IGM Biosciences. However, Biomea Fusion is 2.21 times less risky than IGM Biosciences. It trades about -0.15 of its potential returns per unit of risk. IGM Biosciences is currently generating about -0.19 per unit of risk. If you would invest  400.00  in Biomea Fusion on December 27, 2024 and sell it today you would lose (148.00) from holding Biomea Fusion or give up 37.0% of portfolio value over 90 days.

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

Biomea Fusion  vs.  IGM Biosciences

Biomea Fusion

Risk-Adjusted Performance

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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

IGM Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days IGM Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in April 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Biomea Fusion and IGM Biosciences

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

The idea behind Biomea Fusion and IGM Biosciences 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.