Correlation Between Blueprint Medicines and Cogent Biosciences

Can any of the company-specific risk be diversified away by investing in both Blueprint 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 Blueprint 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 Blueprint Medicines Corp and Cogent Biosciences, you can compare the effects of market volatilities on Blueprint 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 Blueprint Medicines with a short position of Cogent Biosciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blueprint Medicines and Cogent Biosciences.

Diversification Opportunities for Blueprint Medicines and Cogent Biosciences

0.64

Correlation Coefficient

Blueprint Medicines  Cogent Biosciences

Poor diversification

The 3 months correlation between Blueprint and Cogent is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Blueprint Medicines Corp and Cogent Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Biosciences and Blueprint 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 Blueprint Medicines Corp 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 Blueprint Medicines i.e., Blueprint Medicines and Cogent Biosciences go up and down completely randomly.

Pair Corralation between Blueprint Medicines and Cogent Biosciences

Given the investment horizon of 90 days Blueprint Medicines is expected to generate 1.9 times less return on investment than Cogent Biosciences. But when comparing it to its historical volatility, Blueprint Medicines Corp is 1.66 times less risky than Cogent Biosciences. It trades about 0.04 of its potential returns per unit of risk. Cogent Biosciences is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  459.00  in Cogent Biosciences on February 28, 2024 and sell it today you would earn a total of  364.00  from holding Cogent Biosciences or generate 79.3% return on investment over 90 days.

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

Blueprint Medicines Corp  vs.  Cogent Biosciences

Blueprint Medicines Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Blueprint Medicines Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating primary indicators, Blueprint Medicines may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Cogent Biosciences

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cogent Biosciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating technical and fundamental indicators, Cogent Biosciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Blueprint Medicines and Cogent Biosciences

The main advantage of trading using opposite Blueprint Medicines and Cogent Biosciences positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blueprint 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.

The idea behind Blueprint Medicines Corp and Cogent Biosciences 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 Transaction History module to view history of all your transactions and understand their impact on performance.