Correlation Between Replimune and Olema Pharmaceuticals

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

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

Diversification Opportunities for Replimune and Olema Pharmaceuticals

-0.32

Correlation Coefficient

Replimune  Olema Pharmaceuticals

Very good diversification

The 3 months correlation between Replimune and Olema is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Replimune Group and Olema Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olema Pharmaceuticals and Replimune 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 Replimune Group are associated (or correlated) with Olema Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olema Pharmaceuticals has no effect on the direction of Replimune i.e., Replimune and Olema Pharmaceuticals go up and down completely randomly.

Pair Corralation between Replimune and Olema Pharmaceuticals

Given the investment horizon of 90 days Replimune Group is expected to generate 1.4 times more return on investment than Olema Pharmaceuticals. However, Replimune is 1.4 times more volatile than Olema Pharmaceuticals. It trades about 0.11 of its potential returns per unit of risk. Olema Pharmaceuticals is currently generating about -0.02 per unit of risk. If you would invest  1,028  in Replimune Group on September 3, 2024 and sell it today you would earn a total of  380.00  from holding Replimune Group or generate 36.96% return on investment over 90 days.

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

Replimune Group  vs.  Olema Pharmaceuticals

Replimune Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Replimune Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Replimune disclosed solid returns over the last few months and may actually be approaching a breakup point.

Olema Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Olema Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong primary indicators, Olema Pharmaceuticals is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Replimune and Olema Pharmaceuticals

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

The idea behind Replimune Group and Olema 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.