Correlation Between Graphite Bio and Terns Pharmaceuticals

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

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

Diversification Opportunities for Graphite Bio and Terns Pharmaceuticals

0.67

Correlation Coefficient

Graphite Bio  Terns Pharmaceuticals

Poor diversification

The 3 months correlation between Graphite and Terns is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Graphite Bio and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals and Graphite Bio 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 Graphite Bio are associated (or correlated) with Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of Graphite Bio i.e., Graphite Bio and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between Graphite Bio and Terns Pharmaceuticals

If you would invest  655.00  in Terns Pharmaceuticals on September 15, 2024 and sell it today you would earn a total of  18.00  from holding Terns Pharmaceuticals or generate 2.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	4.76%
Values	Daily Returns

Graphite Bio  vs.  Terns Pharmaceuticals

Graphite Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Graphite Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Graphite Bio is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Graphite Bio and Terns Pharmaceuticals

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

The idea behind Graphite Bio and Terns Pharmaceuticals 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.