Correlation Between Moleculin Biotech and Biomea Fusion

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

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

Diversification Opportunities for Moleculin Biotech and Biomea Fusion

0.69

Correlation Coefficient

Moleculin Biotech  Biomea Fusion

Poor diversification

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

Pair Corralation between Moleculin Biotech and Biomea Fusion

Given the investment horizon of 90 days Moleculin Biotech is expected to under-perform the Biomea Fusion. In addition to that, Moleculin Biotech is 1.1 times more volatile than Biomea Fusion. It trades about -0.14 of its total potential returns per unit of risk. Biomea Fusion is currently generating about -0.03 per unit of volatility. If you would invest  1,392  in Biomea Fusion on January 19, 2024 and sell it today you would lose (242.00) from holding Biomea Fusion or give up 17.39% of portfolio value over 90 days.

Time Period	1 Month [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Moleculin Biotech  vs.  Biomea Fusion

Moleculin Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Moleculin Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Biomea Fusion

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Biomea Fusion has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Moleculin Biotech and Biomea Fusion

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

The idea behind Moleculin Biotech and Biomea Fusion 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.