Correlation Between Edgewise Therapeutics and Assembly Biosciences

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

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

Diversification Opportunities for Edgewise Therapeutics and Assembly Biosciences

0.39

Correlation Coefficient

Edgewise Therapeutics  Assembly Biosciences

Weak diversification

The 3 months correlation between Edgewise and Assembly is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics and Assembly Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Assembly Biosciences and Edgewise Therapeutics 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 Edgewise Therapeutics are associated (or correlated) with Assembly Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Assembly Biosciences has no effect on the direction of Edgewise Therapeutics i.e., Edgewise Therapeutics and Assembly Biosciences go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and Assembly Biosciences

Given the investment horizon of 90 days Edgewise Therapeutics is expected to generate 1.4 times more return on investment than Assembly Biosciences. However, Edgewise Therapeutics is 1.4 times more volatile than Assembly Biosciences. It trades about 0.06 of its potential returns per unit of risk. Assembly Biosciences is currently generating about 0.03 per unit of risk. If you would invest  1,737  in Edgewise Therapeutics on October 13, 2024 and sell it today you would earn a total of  678.00  from holding Edgewise Therapeutics or generate 39.03% return on investment over 90 days.

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

Edgewise Therapeutics  vs.  Assembly Biosciences

Edgewise Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Edgewise Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Assembly Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Assembly Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Assembly Biosciences is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Edgewise Therapeutics and Assembly Biosciences

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

The idea behind Edgewise Therapeutics and Assembly Biosciences 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.