Correlation Between 4D Molecular and Blueprint Medicines

Can any of the company-specific risk be diversified away by investing in both 4D Molecular 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 4D Molecular and Blueprint Medicines into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 4D Molecular Therapeutics and Blueprint Medicines Corp, you can compare the effects of market volatilities on 4D Molecular 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 4D Molecular with a short position of Blueprint Medicines. Check out your portfolio center. Please also check ongoing floating volatility patterns of 4D Molecular and Blueprint Medicines.

Diversification Opportunities for 4D Molecular and Blueprint Medicines

-0.32

Correlation Coefficient

4D Molecular  Blueprint Medicines

Very good diversification

The 3 months correlation between FDMT and Blueprint is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding 4D Molecular Therapeutics 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 4D Molecular 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 4D Molecular Therapeutics 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 4D Molecular i.e., 4D Molecular and Blueprint Medicines go up and down completely randomly.

Pair Corralation between 4D Molecular and Blueprint Medicines

Given the investment horizon of 90 days 4D Molecular Therapeutics is expected to under-perform the Blueprint Medicines. In addition to that, 4D Molecular is 1.8 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 0.07 per unit of volatility. If you would invest  4,415  in Blueprint Medicines Corp on October 21, 2024 and sell it today you would earn a total of  6,590  from holding Blueprint Medicines Corp or generate 149.26% return on investment over 90 days.

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

4D Molecular Therapeutics  vs.  Blueprint Medicines Corp

4D Molecular Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 4D Molecular Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's primary indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Blueprint Medicines Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Blueprint Medicines Corp are ranked lower than 10 (%) 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 4D Molecular and Blueprint Medicines

The main advantage of trading using opposite 4D Molecular and Blueprint Medicines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 4D Molecular 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 4D Molecular Therapeutics 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.

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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.