Correlation Between Scholar Rock and Bright Minds

Can any of the company-specific risk be diversified away by investing in both Scholar Rock and Bright Minds 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 Scholar Rock and Bright Minds into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Scholar Rock and Bright Minds

-0.18

Correlation Coefficient

Scholar Rock  Bright Minds

Good diversification

The 3 months correlation between Scholar and Bright is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Scholar Rock Holding and Bright Minds Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bright Minds Biosciences and Scholar Rock 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 Scholar Rock Holding are associated (or correlated) with Bright Minds. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bright Minds Biosciences has no effect on the direction of Scholar Rock i.e., Scholar Rock and Bright Minds go up and down completely randomly.

Pair Corralation between Scholar Rock and Bright Minds

Given the investment horizon of 90 days Scholar Rock Holding is expected to generate 0.66 times more return on investment than Bright Minds. However, Scholar Rock Holding is 1.52 times less risky than Bright Minds. It trades about -0.03 of its potential returns per unit of risk. Bright Minds Biosciences is currently generating about -0.07 per unit of risk. If you would invest  3,990  in Scholar Rock Holding on November 28, 2024 and sell it today you would lose (355.00) from holding Scholar Rock Holding or give up 8.9% of portfolio value over 90 days.

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

Scholar Rock Holding  vs.  Bright Minds Biosciences

Scholar Rock Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scholar Rock Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bright Minds Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bright Minds Biosciences 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 basic indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Scholar Rock and Bright Minds

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

The idea behind Scholar Rock Holding and Bright Minds Biosciences 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.