Correlation Between Biotron and Foghorn Therapeutics
Can any of the company-specific risk be diversified away by investing in both Biotron and Foghorn 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 Biotron and Foghorn Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Biotron Limited and Foghorn Therapeutics, you can compare the effects of market volatilities on Biotron and Foghorn 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 Biotron with a short position of Foghorn Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Biotron and Foghorn Therapeutics.
Diversification Opportunities for Biotron and Foghorn Therapeutics
-0.3 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Biotron and Foghorn is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Biotron Limited and Foghorn Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foghorn Therapeutics and Biotron 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 Biotron Limited are associated (or correlated) with Foghorn Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foghorn Therapeutics has no effect on the direction of Biotron i.e., Biotron and Foghorn Therapeutics go up and down completely randomly.
Pair Corralation between Biotron and Foghorn Therapeutics
Assuming the 90 days horizon Biotron Limited is expected to under-perform the Foghorn Therapeutics. But the pink sheet apears to be less risky and, when comparing its historical volatility, Biotron Limited is 1.12 times less risky than Foghorn Therapeutics. The pink sheet trades about -0.16 of its potential returns per unit of risk. The Foghorn Therapeutics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 762.00 in Foghorn Therapeutics on September 1, 2024 and sell it today you would earn a total of 37.00 from holding Foghorn Therapeutics or generate 4.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Biotron Limited vs. Foghorn Therapeutics
Performance |
| Timeline |
| Biotron Limited |
| Foghorn Therapeutics |
Biotron and Foghorn Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Biotron and Foghorn Therapeutics
The main advantage of trading using opposite Biotron and Foghorn Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Biotron position performs unexpectedly, Foghorn 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 Foghorn Therapeutics will offset losses from the drop in Foghorn Therapeutics' long position.The idea behind Biotron Limited and Foghorn 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.| Foghorn Therapeutics vs. C4 Therapeutics | Foghorn Therapeutics vs. Prelude Therapeutics | Foghorn Therapeutics vs. Rezolute | Foghorn Therapeutics vs. Shattuck Labs |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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