Correlation Between Homology Medicines and Gracell Biotechnologies

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

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

Diversification Opportunities for Homology Medicines and Gracell Biotechnologies

-0.08

Correlation Coefficient

Homology Medicines  Gracell Biotechnologies

Good diversification

The 3 months correlation between Homology and Gracell is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Homology Medicines and Gracell Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gracell Biotechnologies and Homology 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 Homology Medicines are associated (or correlated) with Gracell Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gracell Biotechnologies has no effect on the direction of Homology Medicines i.e., Homology Medicines and Gracell Biotechnologies go up and down completely randomly.

Pair Corralation between Homology Medicines and Gracell Biotechnologies

Given the investment horizon of 90 days Homology Medicines is expected to generate 1.21 times more return on investment than Gracell Biotechnologies. However, Homology Medicines is 1.21 times more volatile than Gracell Biotechnologies. It trades about 0.46 of its potential returns per unit of risk. Gracell Biotechnologies is currently generating about -0.36 per unit of risk. If you would invest  89.00  in Homology Medicines on September 30, 2024 and sell it today you would earn a total of  20.00  from holding Homology Medicines or generate 22.47% return on investment over 90 days.

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

Homology Medicines  vs.  Gracell Biotechnologies

Homology Medicines

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gracell Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gracell Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Gracell Biotechnologies is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Homology Medicines and Gracell Biotechnologies

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

The idea behind Homology Medicines and Gracell Biotechnologies 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.