Correlation Between Ocean Biomedical and Beam Therapeutics

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

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

Diversification Opportunities for Ocean Biomedical and Beam Therapeutics

-0.61

Correlation Coefficient

Ocean Biomedical  Beam Therapeutics

Excellent diversification

The 3 months correlation between Ocean and Beam is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Ocean Biomedical and Beam Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beam Therapeutics and Ocean Biomedical 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 Ocean Biomedical are associated (or correlated) with Beam Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beam Therapeutics has no effect on the direction of Ocean Biomedical i.e., Ocean Biomedical and Beam Therapeutics go up and down completely randomly.

Pair Corralation between Ocean Biomedical and Beam Therapeutics

Given the investment horizon of 90 days Ocean Biomedical is expected to under-perform the Beam Therapeutics. In addition to that, Ocean Biomedical is 1.27 times more volatile than Beam Therapeutics. It trades about -0.07 of its total potential returns per unit of risk. Beam Therapeutics is currently generating about 0.02 per unit of volatility. If you would invest  2,659  in Beam Therapeutics on October 13, 2024 and sell it today you would lose (20.00) from holding Beam Therapeutics or give up 0.75% of portfolio value over 90 days.

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

Ocean Biomedical  vs.  Beam Therapeutics

Ocean Biomedical

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ocean Biomedical 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 technical and fundamental indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Beam Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Beam Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Beam Therapeutics is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Ocean Biomedical and Beam Therapeutics

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

The idea behind Ocean Biomedical and Beam Therapeutics 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.