Correlation Between Stoke Therapeutics and Bicycle Therapeutics

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

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

Diversification Opportunities for Stoke Therapeutics and Bicycle Therapeutics

0.23

Correlation Coefficient

Stoke Therapeutics  Bicycle Therapeutics

Modest diversification

The 3 months correlation between Stoke and Bicycle is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Stoke Therapeutics and Bicycle Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bicycle Therapeutics and Stoke 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 Stoke Therapeutics are associated (or correlated) with Bicycle Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bicycle Therapeutics has no effect on the direction of Stoke Therapeutics i.e., Stoke Therapeutics and Bicycle Therapeutics go up and down completely randomly.

Pair Corralation between Stoke Therapeutics and Bicycle Therapeutics

Given the investment horizon of 90 days Stoke Therapeutics is expected to under-perform the Bicycle Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Stoke Therapeutics is 1.22 times less risky than Bicycle Therapeutics. The stock trades about -0.07 of its potential returns per unit of risk. The Bicycle Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,083  in Bicycle Therapeutics on September 3, 2024 and sell it today you would lose (43.00) from holding Bicycle Therapeutics or give up 2.06% of portfolio value over 90 days.

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

Stoke Therapeutics  vs.  Bicycle Therapeutics

Stoke Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stoke Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Bicycle Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bicycle Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bicycle Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stoke Therapeutics and Bicycle Therapeutics

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

The idea behind Stoke Therapeutics and Bicycle 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.