Correlation Between Terns Pharmaceuticals and BridgeBio Pharma
Can any of the company-specific risk be diversified away by investing in both Terns Pharmaceuticals and BridgeBio Pharma 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 Terns Pharmaceuticals and BridgeBio Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Terns Pharmaceuticals and BridgeBio Pharma, you can compare the effects of market volatilities on Terns Pharmaceuticals and BridgeBio Pharma 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 Terns Pharmaceuticals with a short position of BridgeBio Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Terns Pharmaceuticals and BridgeBio Pharma.
Diversification Opportunities for Terns Pharmaceuticals and BridgeBio Pharma
0.43 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Terns and BridgeBio is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Terns Pharmaceuticals and BridgeBio Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BridgeBio Pharma and Terns Pharmaceuticals 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 Terns Pharmaceuticals are associated (or correlated) with BridgeBio Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BridgeBio Pharma has no effect on the direction of Terns Pharmaceuticals i.e., Terns Pharmaceuticals and BridgeBio Pharma go up and down completely randomly.
Pair Corralation between Terns Pharmaceuticals and BridgeBio Pharma
Given the investment horizon of 90 days Terns Pharmaceuticals is expected to under-perform the BridgeBio Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Terns Pharmaceuticals is 1.3 times less risky than BridgeBio Pharma. The stock trades about -0.08 of its potential returns per unit of risk. The BridgeBio Pharma is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 2,450 in BridgeBio Pharma on August 30, 2024 and sell it today you would earn a total of 299.00 from holding BridgeBio Pharma or generate 12.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Terns Pharmaceuticals vs. BridgeBio Pharma
Performance |
| Timeline |
| Terns Pharmaceuticals |
| BridgeBio Pharma |
Terns Pharmaceuticals and BridgeBio Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Terns Pharmaceuticals and BridgeBio Pharma
The main advantage of trading using opposite Terns Pharmaceuticals and BridgeBio Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terns Pharmaceuticals position performs unexpectedly, BridgeBio Pharma 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 BridgeBio Pharma will offset losses from the drop in BridgeBio Pharma's long position.| Terns Pharmaceuticals vs. Amylyx Pharmaceuticals | Terns Pharmaceuticals vs. Acumen Pharmaceuticals | Terns Pharmaceuticals vs. Inozyme Pharma | Terns Pharmaceuticals vs. X4 Pharmaceuticals |
| BridgeBio Pharma vs. Blueprint Medicines Corp | BridgeBio Pharma vs. Amylyx Pharmaceuticals | BridgeBio Pharma vs. Day One Biopharmaceuticals | BridgeBio Pharma vs. Terns Pharmaceuticals |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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