Correlation Between Generation Bio and Gracell Biotechnologies

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

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

Diversification Opportunities for Generation Bio and Gracell Biotechnologies

-0.88

Correlation Coefficient

Generation Bio  Gracell Biotechnologies

Pay attention - limited upside

The 3 months correlation between Generation and Gracell is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Generation Bio Co and Gracell Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gracell Biotechnologies and Generation 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 Generation Bio Co 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 Generation Bio i.e., Generation Bio and Gracell Biotechnologies go up and down completely randomly.

Pair Corralation between Generation Bio and Gracell Biotechnologies

Given the investment horizon of 90 days Generation Bio Co is expected to under-perform the Gracell Biotechnologies. In addition to that, Generation Bio is 1.06 times more volatile than Gracell Biotechnologies. It trades about -0.01 of its total potential returns per unit of risk. Gracell Biotechnologies is currently generating about 0.1 per unit of volatility. If you would invest  217.00  in Gracell Biotechnologies on September 30, 2024 and sell it today you would earn a total of  185.00  from holding Gracell Biotechnologies or generate 85.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	27.36%
Values	Daily Returns

Generation Bio Co  vs.  Gracell Biotechnologies

Generation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generation Bio Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm 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 Generation Bio and Gracell Biotechnologies

The main advantage of trading using opposite Generation Bio and Gracell Biotechnologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Generation Bio 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 Generation Bio Co 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.