Correlation Between Magenta Therapeutics and GeoVax Labs

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

By analyzing existing cross correlation between Magenta Therapeutics and GeoVax Labs, you can compare the effects of market volatilities on Magenta Therapeutics and GeoVax Labs 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 GeoVax Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magenta Therapeutics and GeoVax Labs.

Diversification Opportunities for Magenta Therapeutics and GeoVax Labs

0.51

Correlation Coefficient

Magenta Therapeutics  GeoVax Labs

Very weak diversification

The 3 months correlation between Magenta and GeoVax is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Magenta Therapeutics and GeoVax Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GeoVax Labs 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 GeoVax Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GeoVax Labs has no effect on the direction of Magenta Therapeutics i.e., Magenta Therapeutics and GeoVax Labs go up and down completely randomly.

Pair Corralation between Magenta Therapeutics and GeoVax Labs

Given the investment horizon of 90 days Magenta Therapeutics is expected to generate 24.93 times less return on investment than GeoVax Labs. But when comparing it to its historical volatility, Magenta Therapeutics is 6.31 times less risky than GeoVax Labs. It trades about 0.01 of its potential returns per unit of risk. GeoVax Labs is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  998.00  in GeoVax Labs on September 2, 2024 and sell it today you would lose (734.00) from holding GeoVax Labs or give up 73.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	31.05%
Values	Daily Returns

Magenta Therapeutics  vs.  GeoVax Labs

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.

GeoVax Labs

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GeoVax Labs has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Magenta Therapeutics and GeoVax Labs

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

The idea behind Magenta Therapeutics and GeoVax Labs 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..