Correlation Between Blueprint Medicines and Dow Jones

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

By analyzing existing cross correlation between Blueprint Medicines Corp and Dow Jones Industrial, you can compare the effects of market volatilities on Blueprint Medicines and Dow Jones 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 Blueprint Medicines with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blueprint Medicines and Dow Jones.

Diversification Opportunities for Blueprint Medicines and Dow Jones

0.72

Correlation Coefficient

Blueprint Medicines  Dow Jones

Poor diversification

The 3 months correlation between Blueprint and Dow is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Blueprint Medicines Corp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and Blueprint Medicines 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 Blueprint Medicines Corp are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of Blueprint Medicines i.e., Blueprint Medicines and Dow Jones go up and down completely randomly.

Pair Corralation between Blueprint Medicines and Dow Jones

Given the investment horizon of 90 days Blueprint Medicines Corp is expected to generate 4.14 times more return on investment than Dow Jones. However, Blueprint Medicines is 4.14 times more volatile than Dow Jones Industrial. It trades about 0.03 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about -0.04 per unit of risk. If you would invest  8,682  in Blueprint Medicines Corp on December 30, 2024 and sell it today you would earn a total of  190.00  from holding Blueprint Medicines Corp or generate 2.19% return on investment over 90 days.

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

Blueprint Medicines Corp  vs.  Dow Jones Industrial

Pair Trading with Blueprint Medicines and Dow Jones

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

The idea behind Blueprint Medicines Corp and Dow Jones Industrial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.