Correlation Between Revolution Medicines and Cabaletta Bio

Can any of the company-specific risk be diversified away by investing in both Revolution Medicines and Cabaletta 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 Cabaletta 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 Cabaletta Bio, you can compare the effects of market volatilities on Revolution Medicines and Cabaletta 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 Cabaletta Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolution Medicines and Cabaletta Bio.

Diversification Opportunities for Revolution Medicines and Cabaletta Bio

-0.12

Correlation Coefficient

Revolution Medicines  Cabaletta Bio

Good diversification

The 3 months correlation between Revolution and Cabaletta is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and Cabaletta Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabaletta 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 Cabaletta Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabaletta Bio has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and Cabaletta Bio go up and down completely randomly.

Pair Corralation between Revolution Medicines and Cabaletta Bio

Given the investment horizon of 90 days Revolution Medicines is expected to generate 0.31 times more return on investment than Cabaletta Bio. However, Revolution Medicines is 3.22 times less risky than Cabaletta Bio. It trades about -0.04 of its potential returns per unit of risk. Cabaletta Bio is currently generating about -0.1 per unit of risk. If you would invest  4,775  in Revolution Medicines on September 21, 2024 and sell it today you would lose (369.00) from holding Revolution Medicines or give up 7.73% of portfolio value over 90 days.

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

Revolution Medicines  vs.  Cabaletta Bio

Revolution Medicines

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Revolution Medicines are ranked lower than 2 (%) 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.

Cabaletta Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabaletta Bio 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 fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Revolution Medicines and Cabaletta Bio

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

The idea behind Revolution Medicines and Cabaletta 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.