Correlation Between Bluebird Bio and Mersana Therapeutics

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

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

Diversification Opportunities for Bluebird Bio and Mersana Therapeutics

-0.47

Correlation Coefficient

Bluebird Bio  Mersana Therapeutics

Very good diversification

The 3 months correlation between Bluebird and Mersana is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bluebird bio and Mersana Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mersana Therapeutics and Bluebird Bio 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 Bluebird bio are associated (or correlated) with Mersana Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mersana Therapeutics has no effect on the direction of Bluebird Bio i.e., Bluebird Bio and Mersana Therapeutics go up and down completely randomly.

Pair Corralation between Bluebird Bio and Mersana Therapeutics

Given the investment horizon of 90 days Bluebird Bio is expected to generate 2.62 times less return on investment than Mersana Therapeutics. In addition to that, Bluebird Bio is 2.58 times more volatile than Mersana Therapeutics. It trades about 0.01 of its total potential returns per unit of risk. Mersana Therapeutics is currently generating about 0.07 per unit of volatility. If you would invest  211.00  in Mersana Therapeutics on September 13, 2024 and sell it today you would earn a total of  37.00  from holding Mersana Therapeutics or generate 17.54% return on investment over 90 days.

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

Bluebird bio  vs.  Mersana Therapeutics

Bluebird bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bluebird bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather unfluctuating basic indicators, Bluebird Bio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Mersana Therapeutics

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mersana Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Mersana Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bluebird Bio and Mersana Therapeutics

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

The idea behind Bluebird bio and Mersana Therapeutics 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.