Correlation Between Beam TherapeuticsInc and Portage Biotech

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

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

Diversification Opportunities for Beam TherapeuticsInc and Portage Biotech

0.87

Correlation Coefficient

Beam TherapeuticsInc  Portage Biotech

Very poor diversification

The 3 months correlation between Beam and Portage is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Beam TherapeuticsInc and Portage Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Portage Biotech and Beam 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 Beam TherapeuticsInc are associated (or correlated) with Portage Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Portage Biotech has no effect on the direction of Beam TherapeuticsInc i.e., Beam TherapeuticsInc and Portage Biotech go up and down completely randomly.

Pair Corralation between Beam TherapeuticsInc and Portage Biotech

Given the investment horizon of 90 days Beam TherapeuticsInc is expected to generate 0.54 times more return on investment than Portage Biotech. However, Beam TherapeuticsInc is 1.84 times less risky than Portage Biotech. It trades about 0.14 of its potential returns per unit of risk. Portage Biotech is currently generating about 0.03 per unit of risk. If you would invest  2,205  in Beam TherapeuticsInc on February 27, 2024 and sell it today you would earn a total of  227.00  from holding Beam TherapeuticsInc or generate 10.29% return on investment over 90 days.

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

Beam TherapeuticsInc  vs.  Portage Biotech

Beam TherapeuticsInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beam TherapeuticsInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Portage Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Portage Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Beam TherapeuticsInc and Portage Biotech

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

The idea behind Beam TherapeuticsInc and Portage Biotech 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.