Correlation Between Beam Therapeutics and VectivBio Holding

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

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

Diversification Opportunities for Beam Therapeutics and VectivBio Holding

0.69

Correlation Coefficient

Beam Therapeutics  VectivBio Holding

Poor diversification

The 3 months correlation between Beam and VectivBio is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Beam Therapeutics and VectivBio Holding AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VectivBio Holding and Beam 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 Beam Therapeutics are associated (or correlated) with VectivBio Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VectivBio Holding has no effect on the direction of Beam Therapeutics i.e., Beam Therapeutics and VectivBio Holding go up and down completely randomly.

Pair Corralation between Beam Therapeutics and VectivBio Holding

Given the investment horizon of 90 days Beam Therapeutics is expected to generate 43.12 times less return on investment than VectivBio Holding. But when comparing it to its historical volatility, Beam Therapeutics is 1.01 times less risky than VectivBio Holding. It trades about 0.0 of its potential returns per unit of risk. VectivBio Holding AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  895.00  in VectivBio Holding AG on September 28, 2024 and sell it today you would earn a total of  790.00  from holding VectivBio Holding AG or generate 88.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	25.6%
Values	Daily Returns

Beam Therapeutics  vs.  VectivBio Holding AG

Beam Therapeutics

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Beam Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Beam Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

VectivBio Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VectivBio Holding AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, VectivBio Holding is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Beam Therapeutics and VectivBio Holding

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

The idea behind Beam Therapeutics and VectivBio Holding AG 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.