Correlation Between Foghorn Therapeutics and Magenta Therapeutics
Can any of the company-specific risk be diversified away by investing in both Foghorn Therapeutics and Magenta 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 Foghorn Therapeutics and Magenta Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Foghorn Therapeutics and Magenta Therapeutics, you can compare the effects of market volatilities on Foghorn Therapeutics and Magenta 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 Foghorn Therapeutics with a short position of Magenta Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Foghorn Therapeutics and Magenta Therapeutics.
Diversification Opportunities for Foghorn Therapeutics and Magenta Therapeutics
-0.07 | Correlation Coefficient |
Good diversification
The 3 months correlation between Foghorn and Magenta is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Foghorn Therapeutics and Magenta Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magenta Therapeutics and Foghorn Therapeutics 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 Foghorn Therapeutics are associated (or correlated) with Magenta Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magenta Therapeutics has no effect on the direction of Foghorn Therapeutics i.e., Foghorn Therapeutics and Magenta Therapeutics go up and down completely randomly.
Pair Corralation between Foghorn Therapeutics and Magenta Therapeutics
Given the investment horizon of 90 days Foghorn Therapeutics is expected to generate 2.62 times less return on investment than Magenta Therapeutics. In addition to that, Foghorn Therapeutics is 2.47 times more volatile than Magenta Therapeutics. It trades about 0.03 of its total potential returns per unit of risk. Magenta Therapeutics is currently generating about 0.2 per unit of volatility. If you would invest 70.00 in Magenta Therapeutics on September 1, 2024 and sell it today you would earn a total of 12.00 from holding Magenta Therapeutics or generate 17.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 8.33% |
| Values | Daily Returns |
Foghorn Therapeutics vs. Magenta Therapeutics
Performance |
| Timeline |
| Foghorn Therapeutics |
| Magenta Therapeutics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Foghorn Therapeutics and Magenta Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Foghorn Therapeutics and Magenta Therapeutics
The main advantage of trading using opposite Foghorn Therapeutics and Magenta Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foghorn Therapeutics position performs unexpectedly, Magenta 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 Magenta Therapeutics will offset losses from the drop in Magenta Therapeutics' long position.| Foghorn Therapeutics vs. C4 Therapeutics | Foghorn Therapeutics vs. Prelude Therapeutics | Foghorn Therapeutics vs. Rezolute | Foghorn Therapeutics vs. Shattuck Labs |
| Magenta Therapeutics vs. Assembly Biosciences | Magenta Therapeutics vs. Instil Bio | Magenta Therapeutics vs. Nuvation Bio | Magenta Therapeutics vs. Achilles Therapeutics PLC |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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