Correlation Between Caribou Biosciences and Blueprint Medicines

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

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

Diversification Opportunities for Caribou Biosciences and Blueprint Medicines

0.7

Correlation Coefficient

Caribou Biosciences  Blueprint Medicines

Poor diversification

The 3 months correlation between Caribou and Blueprint is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Caribou Biosciences and Blueprint Medicines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blueprint Medicines Corp and Caribou Biosciences 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 Caribou Biosciences are associated (or correlated) with Blueprint Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blueprint Medicines Corp has no effect on the direction of Caribou Biosciences i.e., Caribou Biosciences and Blueprint Medicines go up and down completely randomly.

Pair Corralation between Caribou Biosciences and Blueprint Medicines

Given the investment horizon of 90 days Caribou Biosciences is expected to under-perform the Blueprint Medicines. In addition to that, Caribou Biosciences is 1.74 times more volatile than Blueprint Medicines Corp. It trades about -0.02 of its total potential returns per unit of risk. Blueprint Medicines Corp is currently generating about 0.05 per unit of volatility. If you would invest  4,797  in Blueprint Medicines Corp on October 15, 2024 and sell it today you would earn a total of  3,946  from holding Blueprint Medicines Corp or generate 82.26% return on investment over 90 days.

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

Caribou Biosciences  vs.  Blueprint Medicines Corp

Caribou Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribou Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Blueprint Medicines Corp

Risk-Adjusted Performance

6 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blueprint Medicines Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Blueprint Medicines exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Caribou Biosciences and Blueprint Medicines

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

The idea behind Caribou Biosciences and Blueprint Medicines Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.