Correlation Between Relay Therapeutics and Recursion Pharmaceuticals

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

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

Diversification Opportunities for Relay Therapeutics and Recursion Pharmaceuticals

0.29

Correlation Coefficient

Relay Therapeutics  Recursion Pharmaceuticals

Modest diversification

The 3 months correlation between Relay and Recursion is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Relay Therapeutics and Recursion Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Recursion Pharmaceuticals and Relay Therapeutics 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 Relay Therapeutics are associated (or correlated) with Recursion Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Recursion Pharmaceuticals has no effect on the direction of Relay Therapeutics i.e., Relay Therapeutics and Recursion Pharmaceuticals go up and down completely randomly.

Pair Corralation between Relay Therapeutics and Recursion Pharmaceuticals

Given the investment horizon of 90 days Relay Therapeutics is expected to under-perform the Recursion Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Relay Therapeutics is 1.12 times less risky than Recursion Pharmaceuticals. The stock trades about -0.11 of its potential returns per unit of risk. The Recursion Pharmaceuticals is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  677.00  in Recursion Pharmaceuticals on December 30, 2024 and sell it today you would lose (96.00) from holding Recursion Pharmaceuticals or give up 14.18% of portfolio value over 90 days.

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

Relay Therapeutics  vs.  Recursion Pharmaceuticals

Relay Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Relay Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Recursion Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Recursion Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Recursion Pharmaceuticals is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Relay Therapeutics and Recursion Pharmaceuticals

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

The idea behind Relay Therapeutics and Recursion 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.