Correlation Between Prelude TherapeuticsInc and Foghorn TherapeuticsInc

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

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

Diversification Opportunities for Prelude TherapeuticsInc and Foghorn TherapeuticsInc

0.59

Correlation Coefficient

Prelude TherapeuticsInc  Foghorn TherapeuticsInc

Very weak diversification

The 3 months correlation between Prelude and Foghorn is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Prelude TherapeuticsInc and Foghorn TherapeuticsInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foghorn TherapeuticsInc and Prelude TherapeuticsInc 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 Prelude TherapeuticsInc are associated (or correlated) with Foghorn TherapeuticsInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foghorn TherapeuticsInc has no effect on the direction of Prelude TherapeuticsInc i.e., Prelude TherapeuticsInc and Foghorn TherapeuticsInc go up and down completely randomly.

Pair Corralation between Prelude TherapeuticsInc and Foghorn TherapeuticsInc

Given the investment horizon of 90 days Prelude TherapeuticsInc is expected to generate 0.88 times more return on investment than Foghorn TherapeuticsInc. However, Prelude TherapeuticsInc is 1.14 times less risky than Foghorn TherapeuticsInc. It trades about 0.04 of its potential returns per unit of risk. Foghorn TherapeuticsInc is currently generating about 0.04 per unit of risk. If you would invest  387.00  in Prelude TherapeuticsInc on February 22, 2024 and sell it today you would earn a total of  22.00  from holding Prelude TherapeuticsInc or generate 5.68% return on investment over 90 days.

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

Prelude TherapeuticsInc  vs.  Foghorn TherapeuticsInc

Prelude TherapeuticsInc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prelude TherapeuticsInc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, Prelude TherapeuticsInc exhibited solid returns over the last few months and may actually be approaching a breakup point.

Foghorn TherapeuticsInc

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Foghorn TherapeuticsInc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Foghorn TherapeuticsInc showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prelude TherapeuticsInc and Foghorn TherapeuticsInc

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

The idea behind Prelude TherapeuticsInc and Foghorn TherapeuticsInc 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.