Correlation Between Blueprint Medicines and Vir Biotechnology

Can any of the company-specific risk be diversified away by investing in both Blueprint Medicines and Vir Biotechnology 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 Vir Biotechnology 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 Vir Biotechnology, you can compare the effects of market volatilities on Blueprint Medicines and Vir Biotechnology 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 Vir Biotechnology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blueprint Medicines and Vir Biotechnology.

Diversification Opportunities for Blueprint Medicines and Vir Biotechnology

0.57

Correlation Coefficient

Blueprint Medicines  Vir Biotechnology

Very weak diversification

The 3 months correlation between Blueprint and Vir is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Blueprint Medicines Corp and Vir Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vir Biotechnology 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 Vir Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vir Biotechnology has no effect on the direction of Blueprint Medicines i.e., Blueprint Medicines and Vir Biotechnology go up and down completely randomly.

Pair Corralation between Blueprint Medicines and Vir Biotechnology

Given the investment horizon of 90 days Blueprint Medicines Corp is expected to under-perform the Vir Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, Blueprint Medicines Corp is 2.77 times less risky than Vir Biotechnology. The stock trades about -0.12 of its potential returns per unit of risk. The Vir Biotechnology is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  762.00  in Vir Biotechnology on September 27, 2024 and sell it today you would lose (24.00) from holding Vir Biotechnology or give up 3.15% of portfolio value over 90 days.

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

Blueprint Medicines Corp  vs.  Vir Biotechnology

Blueprint Medicines Corp

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Blueprint Medicines Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound primary indicators, Blueprint Medicines is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Vir Biotechnology

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Vir Biotechnology are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, Vir Biotechnology is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Blueprint Medicines and Vir Biotechnology

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

The idea behind Blueprint Medicines Corp and Vir Biotechnology 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.