Correlation Between Avidity Biosciences and Revolution Medicines

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

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

Diversification Opportunities for Avidity Biosciences and Revolution Medicines

0.19

Correlation Coefficient

Avidity Biosciences  Revolution Medicines

Average diversification

The 3 months correlation between Avidity and Revolution is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Avidity Biosciences and Revolution Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Medicines and Avidity Biosciences 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 Avidity Biosciences are associated (or correlated) with Revolution Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Medicines has no effect on the direction of Avidity Biosciences i.e., Avidity Biosciences and Revolution Medicines go up and down completely randomly.

Pair Corralation between Avidity Biosciences and Revolution Medicines

Considering the 90-day investment horizon Avidity Biosciences is expected to generate 1.53 times more return on investment than Revolution Medicines. However, Avidity Biosciences is 1.53 times more volatile than Revolution Medicines. It trades about 0.05 of its potential returns per unit of risk. Revolution Medicines is currently generating about -0.08 per unit of risk. If you would invest  2,918  in Avidity Biosciences on December 30, 2024 and sell it today you would earn a total of  242.00  from holding Avidity Biosciences or generate 8.29% return on investment over 90 days.

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

Avidity Biosciences  vs.  Revolution Medicines

Avidity Biosciences

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avidity Biosciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Avidity Biosciences may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Revolution Medicines

Risk-Adjusted Performance

Very Weak

Over the last 90 days Revolution Medicines 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 primary indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Avidity Biosciences and Revolution Medicines

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

The idea behind Avidity Biosciences and Revolution Medicines 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.