Correlation Between Sangamo Therapeutics and G1 Therapeutics

Can any of the company-specific risk be diversified away by investing in both Sangamo Therapeutics and G1 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 Sangamo Therapeutics and G1 Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sangamo Therapeutics and G1 Therapeutics, you can compare the effects of market volatilities on Sangamo Therapeutics and G1 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 Sangamo Therapeutics with a short position of G1 Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sangamo Therapeutics and G1 Therapeutics.

Diversification Opportunities for Sangamo Therapeutics and G1 Therapeutics

0.91

Correlation Coefficient

Sangamo Therapeutics  G1 Therapeutics

Almost no diversification

The 3 months correlation between Sangamo and GTHX is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Sangamo Therapeutics and G1 Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on G1 Therapeutics and Sangamo 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 Sangamo Therapeutics are associated (or correlated) with G1 Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of G1 Therapeutics has no effect on the direction of Sangamo Therapeutics i.e., Sangamo Therapeutics and G1 Therapeutics go up and down completely randomly.

Pair Corralation between Sangamo Therapeutics and G1 Therapeutics

Given the investment horizon of 90 days Sangamo Therapeutics is expected to generate 87.43 times more return on investment than G1 Therapeutics. However, Sangamo Therapeutics is 87.43 times more volatile than G1 Therapeutics. It trades about 0.21 of its potential returns per unit of risk. G1 Therapeutics is currently generating about 0.25 per unit of risk. If you would invest  75.00  in Sangamo Therapeutics on September 5, 2024 and sell it today you would earn a total of  140.00  from holding Sangamo Therapeutics or generate 186.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	15.63%
Values	Daily Returns

Sangamo Therapeutics  vs.  G1 Therapeutics

Sangamo Therapeutics

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sangamo Therapeutics are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting primary indicators, Sangamo Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

G1 Therapeutics

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days G1 Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical indicators, G1 Therapeutics is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sangamo Therapeutics and G1 Therapeutics

The main advantage of trading using opposite Sangamo Therapeutics and G1 Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sangamo Therapeutics position performs unexpectedly, G1 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 G1 Therapeutics will offset losses from the drop in G1 Therapeutics' long position.

The idea behind Sangamo Therapeutics and G1 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.