Correlation Between IGM Biosciences and Werewolf Therapeutics

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

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

Diversification Opportunities for IGM Biosciences and Werewolf Therapeutics

0.5

Correlation Coefficient

IGM Biosciences  Werewolf Therapeutics

Very weak diversification

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

Pair Corralation between IGM Biosciences and Werewolf Therapeutics

Given the investment horizon of 90 days IGM Biosciences is expected to under-perform the Werewolf Therapeutics. In addition to that, IGM Biosciences is 1.08 times more volatile than Werewolf Therapeutics. It trades about -0.38 of its total potential returns per unit of risk. Werewolf Therapeutics is currently generating about -0.26 per unit of volatility. If you would invest  272.00  in Werewolf Therapeutics on August 30, 2024 and sell it today you would lose (75.00) from holding Werewolf Therapeutics or give up 27.57% of portfolio value over 90 days.

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

IGM Biosciences  vs.  Werewolf Therapeutics

IGM Biosciences

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Biosciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, IGM Biosciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Werewolf Therapeutics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Werewolf Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Werewolf Therapeutics may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with IGM Biosciences and Werewolf Therapeutics

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

The idea behind IGM Biosciences and Werewolf 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..