Correlation Between MorphoSys and Generation Bio

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

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

Diversification Opportunities for MorphoSys and Generation Bio

0.34

Correlation Coefficient

MorphoSys  Generation Bio

Weak diversification

The 3 months correlation between MorphoSys and Generation is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding MorphoSys AG ADR and Generation Bio Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Generation Bio and MorphoSys 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 MorphoSys AG ADR are associated (or correlated) with Generation Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Generation Bio has no effect on the direction of MorphoSys i.e., MorphoSys and Generation Bio go up and down completely randomly.

Pair Corralation between MorphoSys and Generation Bio

Considering the 90-day investment horizon MorphoSys AG ADR is expected to under-perform the Generation Bio. In addition to that, MorphoSys is 3.06 times more volatile than Generation Bio Co. It trades about -0.18 of its total potential returns per unit of risk. Generation Bio Co is currently generating about -0.08 per unit of volatility. If you would invest  257.00  in Generation Bio Co on September 29, 2024 and sell it today you would lose (146.00) from holding Generation Bio Co or give up 56.81% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	22.22%
Values	Daily Returns

MorphoSys AG ADR  vs.  Generation Bio Co

MorphoSys AG ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MorphoSys AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, MorphoSys is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Generation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generation Bio Co 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 forward 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 MorphoSys and Generation Bio

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

The idea behind MorphoSys AG ADR and Generation Bio Co 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.