Correlation Between Edgewise Therapeutics and MAIA Biotechnology

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

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

Diversification Opportunities for Edgewise Therapeutics and MAIA Biotechnology

0.62

Correlation Coefficient

Edgewise Therapeutics  MAIA Biotechnology

Poor diversification

The 3 months correlation between Edgewise and MAIA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Edgewise Therapeutics and MAIA Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MAIA Biotechnology 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 MAIA Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MAIA Biotechnology has no effect on the direction of Edgewise Therapeutics i.e., Edgewise Therapeutics and MAIA Biotechnology go up and down completely randomly.

Pair Corralation between Edgewise Therapeutics and MAIA Biotechnology

Given the investment horizon of 90 days Edgewise Therapeutics is expected to under-perform the MAIA Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, Edgewise Therapeutics is 1.16 times less risky than MAIA Biotechnology. The stock trades about -0.08 of its potential returns per unit of risk. The MAIA Biotechnology is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  223.00  in MAIA Biotechnology on November 20, 2024 and sell it today you would lose (36.00) from holding MAIA Biotechnology or give up 16.14% of portfolio value over 90 days.

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

Edgewise Therapeutics  vs.  MAIA Biotechnology

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 unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

MAIA Biotechnology

Risk-Adjusted Performance

Very Weak

Over the last 90 days MAIA Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Edgewise Therapeutics and MAIA Biotechnology

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

The idea behind Edgewise Therapeutics and MAIA 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.