Correlation Between Revolution Medicines and Cogent Biosciences
Can any of the company-specific risk be diversified away by investing in both Revolution Medicines and Cogent Biosciences 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 Revolution Medicines and Cogent Biosciences into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Revolution Medicines and Cogent Biosciences, you can compare the effects of market volatilities on Revolution Medicines and Cogent Biosciences 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 Revolution Medicines with a short position of Cogent Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolution Medicines and Cogent Biosciences.
Diversification Opportunities for Revolution Medicines and Cogent Biosciences
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Revolution and Cogent is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and Cogent Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Biosciences and Revolution Medicines 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 Revolution Medicines are associated (or correlated) with Cogent Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Biosciences has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and Cogent Biosciences go up and down completely randomly.
Pair Corralation between Revolution Medicines and Cogent Biosciences
Given the investment horizon of 90 days Revolution Medicines is expected to generate 0.67 times more return on investment than Cogent Biosciences. However, Revolution Medicines is 1.48 times less risky than Cogent Biosciences. It trades about -0.09 of its potential returns per unit of risk. Cogent Biosciences is currently generating about -0.39 per unit of risk. If you would invest 4,092 in Revolution Medicines on November 30, 2024 and sell it today you would lose (184.00) from holding Revolution Medicines or give up 4.5% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Revolution Medicines vs. Cogent Biosciences
Performance |
Timeline |
Revolution Medicines |
Cogent Biosciences |
Revolution Medicines and Cogent Biosciences Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Revolution Medicines and Cogent Biosciences
The main advantage of trading using opposite Revolution Medicines and Cogent Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Revolution Medicines position performs unexpectedly, Cogent Biosciences 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 Cogent Biosciences will offset losses from the drop in Cogent Biosciences' long position.Revolution Medicines vs. Blueprint Medicines Corp | ||
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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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