Correlation Between Sage Therapeutic and Edgewise Therapeutics

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

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

Diversification Opportunities for Sage Therapeutic and Edgewise Therapeutics

-0.62

Correlation Coefficient

Sage Therapeutic  Edgewise Therapeutics

Excellent diversification

The 3 months correlation between Sage and Edgewise is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Sage Therapeutic and Edgewise Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewise Therapeutics and Sage Therapeutic 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 Sage Therapeutic are associated (or correlated) with Edgewise Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewise Therapeutics has no effect on the direction of Sage Therapeutic i.e., Sage Therapeutic and Edgewise Therapeutics go up and down completely randomly.

Pair Corralation between Sage Therapeutic and Edgewise Therapeutics

Given the investment horizon of 90 days Sage Therapeutic is expected to generate 1.41 times more return on investment than Edgewise Therapeutics. However, Sage Therapeutic is 1.41 times more volatile than Edgewise Therapeutics. It trades about 0.16 of its potential returns per unit of risk. Edgewise Therapeutics is currently generating about -0.05 per unit of risk. If you would invest  543.00  in Sage Therapeutic on December 28, 2024 and sell it today you would earn a total of  285.00  from holding Sage Therapeutic or generate 52.49% return on investment over 90 days.

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

Sage Therapeutic  vs.  Edgewise Therapeutics

Sage Therapeutic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Therapeutic are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Sage Therapeutic exhibited solid returns over the last few months and may actually be approaching a breakup point.

Edgewise Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edgewise Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Sage Therapeutic and Edgewise Therapeutics

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

The idea behind Sage Therapeutic and Edgewise Therapeutics 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.