Correlation Between Editas Medicine and Beam Therapeutics

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

By analyzing existing cross correlation between Editas Medicine and Beam Therapeutics, you can compare the effects of market volatilities on Editas Medicine and Beam 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 Editas Medicine with a short position of Beam Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Editas Medicine and Beam Therapeutics.

Diversification Opportunities for Editas Medicine and Beam Therapeutics

0.56

Correlation Coefficient

Editas Medicine  Beam Therapeutics

Very weak diversification

The 3 months correlation between Editas and Beam is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Editas Medicine and Beam Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beam Therapeutics and Editas Medicine 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 Editas Medicine are associated (or correlated) with Beam Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beam Therapeutics has no effect on the direction of Editas Medicine i.e., Editas Medicine and Beam Therapeutics go up and down completely randomly.

Pair Corralation between Editas Medicine and Beam Therapeutics

Given the investment horizon of 90 days Editas Medicine is expected to generate 3.04 times more return on investment than Beam Therapeutics. However, Editas Medicine is 3.04 times more volatile than Beam Therapeutics. It trades about 0.06 of its potential returns per unit of risk. Beam Therapeutics is currently generating about -0.03 per unit of risk. If you would invest  120.00  in Editas Medicine on December 28, 2024 and sell it today you would earn a total of  10.00  from holding Editas Medicine or generate 8.33% return on investment over 90 days.

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

Editas Medicine  vs.  Beam Therapeutics

Editas Medicine

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Editas Medicine are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating forward indicators, Editas Medicine unveiled solid returns over the last few months and may actually be approaching a breakup point.

Beam Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beam Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Editas Medicine and Beam Therapeutics

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

The idea behind Editas Medicine and Beam 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.

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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.