Correlation Between Biomea Fusion and Lyra Therapeutics

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

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

Diversification Opportunities for Biomea Fusion and Lyra Therapeutics

0.4

Correlation Coefficient

Biomea Fusion  Lyra Therapeutics

Very weak diversification

The 3 months correlation between Biomea and Lyra is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Biomea Fusion and Lyra Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lyra Therapeutics 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 Lyra Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lyra Therapeutics has no effect on the direction of Biomea Fusion i.e., Biomea Fusion and Lyra Therapeutics go up and down completely randomly.

Pair Corralation between Biomea Fusion and Lyra Therapeutics

Given the investment horizon of 90 days Biomea Fusion is expected to under-perform the Lyra Therapeutics. In addition to that, Biomea Fusion is 1.15 times more volatile than Lyra Therapeutics. It trades about -0.15 of its total potential returns per unit of risk. Lyra Therapeutics is currently generating about 0.08 per unit of volatility. If you would invest  18.00  in Lyra Therapeutics on November 20, 2024 and sell it today you would earn a total of  3.00  from holding Lyra Therapeutics or generate 16.67% return on investment over 90 days.

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

Biomea Fusion  vs.  Lyra Therapeutics

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

Lyra Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Lyra Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Lyra Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Biomea Fusion and Lyra Therapeutics

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

The idea behind Biomea Fusion and Lyra Therapeutics 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.