Correlation Between Revolution Medicines and Bluebird Bio

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

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

Diversification Opportunities for Revolution Medicines and Bluebird Bio

-0.66

Correlation Coefficient

Revolution Medicines  Bluebird Bio

Excellent diversification

The 3 months correlation between Revolution and Bluebird is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and Bluebird bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluebird bio and Revolution Medicines 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 Revolution Medicines are associated (or correlated) with Bluebird Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluebird bio has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and Bluebird Bio go up and down completely randomly.

Pair Corralation between Revolution Medicines and Bluebird Bio

Given the investment horizon of 90 days Revolution Medicines is expected to generate 3.44 times less return on investment than Bluebird Bio. But when comparing it to its historical volatility, Revolution Medicines is 5.15 times less risky than Bluebird Bio. It trades about 0.02 of its potential returns per unit of risk. Bluebird bio is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  58.00  in Bluebird bio on September 14, 2024 and sell it today you would lose (20.00) from holding Bluebird bio or give up 34.48% of portfolio value over 90 days.

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

Revolution Medicines  vs.  Bluebird bio

Revolution Medicines

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Revolution Medicines are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Revolution Medicines is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Bluebird bio

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bluebird bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Bluebird Bio exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Revolution Medicines and Bluebird Bio

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

The idea behind Revolution Medicines and Bluebird bio 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.