Correlation Between Edgewise Therapeutics and Cabaletta Bio

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

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

Diversification Opportunities for Edgewise Therapeutics and Cabaletta Bio

0.53

Correlation Coefficient

Edgewise Therapeutics  Cabaletta Bio

Very weak diversification

The 3 months correlation between Edgewise and Cabaletta is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics and Cabaletta Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabaletta Bio 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 Cabaletta Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabaletta Bio has no effect on the direction of Edgewise Therapeutics i.e., Edgewise Therapeutics and Cabaletta Bio go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and Cabaletta Bio

Given the investment horizon of 90 days Edgewise Therapeutics is expected to generate 0.67 times more return on investment than Cabaletta Bio. However, Edgewise Therapeutics is 1.5 times less risky than Cabaletta Bio. It trades about -0.05 of its potential returns per unit of risk. Cabaletta Bio is currently generating about -0.08 per unit of risk. If you would invest  2,706  in Edgewise Therapeutics on December 30, 2024 and sell it today you would lose (379.00) from holding Edgewise Therapeutics or give up 14.01% of portfolio value over 90 days.

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

Edgewise Therapeutics  vs.  Cabaletta Bio

Edgewise Therapeutics

Risk-Adjusted Performance

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 latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Cabaletta Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cabaletta Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Edgewise Therapeutics and Cabaletta Bio

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

The idea behind Edgewise Therapeutics and Cabaletta Bio 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.