Correlation Between Gracell Biotechnologies and Homology Medicines

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

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

Diversification Opportunities for Gracell Biotechnologies and Homology Medicines

-0.08

Correlation Coefficient

Gracell Biotechnologies  Homology Medicines

Good diversification

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

Pair Corralation between Gracell Biotechnologies and Homology Medicines

Given the investment horizon of 90 days Gracell Biotechnologies is expected to under-perform the Homology Medicines. But the stock apears to be less risky and, when comparing its historical volatility, Gracell Biotechnologies is 1.21 times less risky than Homology Medicines. The stock trades about -0.36 of its potential returns per unit of risk. The Homology Medicines is currently generating about 0.46 of returns per unit of risk over similar time horizon. 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

Gracell Biotechnologies  vs.  Homology Medicines

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.

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.

Pair Trading with Gracell Biotechnologies and Homology Medicines

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

The idea behind Gracell Biotechnologies and Homology Medicines 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.