Correlation Between Magenta Therapeutics and First Wave

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

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

Diversification Opportunities for Magenta Therapeutics and First Wave

-0.3

Correlation Coefficient

Magenta Therapeutics  First Wave

Very good diversification

The 3 months correlation between Magenta and First is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Magenta Therapeutics and First Wave BioPharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Wave BioPharma and Magenta 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 Magenta Therapeutics are associated (or correlated) with First Wave. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Wave BioPharma has no effect on the direction of Magenta Therapeutics i.e., Magenta Therapeutics and First Wave go up and down completely randomly.

Pair Corralation between Magenta Therapeutics and First Wave

If you would invest  61.00  in First Wave BioPharma on August 31, 2024 and sell it today you would earn a total of  0.00  from holding First Wave BioPharma or generate 0.0% return on investment over 90 days.

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

Magenta Therapeutics  vs.  First Wave BioPharma

Magenta Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Wave BioPharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Wave BioPharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, First Wave is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Magenta Therapeutics and First Wave

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

The idea behind Magenta Therapeutics and First Wave BioPharma 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.