Correlation Between Decibel Therapeutics and Edgewise Therapeutics

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

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

Diversification Opportunities for Decibel Therapeutics and Edgewise Therapeutics

0.5

Correlation Coefficient

Decibel Therapeutics  Edgewise Therapeutics

Very weak diversification

The 3 months correlation between Decibel and Edgewise is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Decibel Therapeutics and Edgewise Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewise Therapeutics and Decibel 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 Decibel Therapeutics are associated (or correlated) with Edgewise Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewise Therapeutics has no effect on the direction of Decibel Therapeutics i.e., Decibel Therapeutics and Edgewise Therapeutics go up and down completely randomly.

Pair Corralation between Decibel Therapeutics and Edgewise Therapeutics

If you would invest  1,788  in Edgewise Therapeutics on August 31, 2024 and sell it today you would earn a total of  1,432  from holding Edgewise Therapeutics or generate 80.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.59%
Values	Daily Returns

Decibel Therapeutics  vs.  Edgewise Therapeutics

Decibel Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Decibel Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Decibel Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Edgewise Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewise Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Edgewise Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Decibel Therapeutics and Edgewise Therapeutics

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

The idea behind Decibel Therapeutics and Edgewise 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.