Correlation Between Waters and Blueprint Medicines

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

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

Diversification Opportunities for Waters and Blueprint Medicines

0.76

Correlation Coefficient

Waters  Blueprint Medicines

Poor diversification

The 3 months correlation between Waters and Blueprint is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Waters and Blueprint Medicines Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blueprint Medicines Corp and Waters 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 Waters are associated (or correlated) with Blueprint Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blueprint Medicines Corp has no effect on the direction of Waters i.e., Waters and Blueprint Medicines go up and down completely randomly.

Pair Corralation between Waters and Blueprint Medicines

Considering the 90-day investment horizon Waters is expected to generate 1.16 times more return on investment than Blueprint Medicines. However, Waters is 1.16 times more volatile than Blueprint Medicines Corp. It trades about 0.08 of its potential returns per unit of risk. Blueprint Medicines Corp is currently generating about 0.04 per unit of risk. If you would invest  33,975  in Waters on September 2, 2024 and sell it today you would earn a total of  4,497  from holding Waters or generate 13.24% return on investment over 90 days.

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

Waters  vs.  Blueprint Medicines Corp

Waters

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Waters are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Waters unveiled solid returns over the last few months and may actually be approaching a breakup point.

Blueprint Medicines Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Blueprint Medicines Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Blueprint Medicines is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Waters and Blueprint Medicines

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

The idea behind Waters and Blueprint Medicines Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.