Correlation Between Editas Medicine and Caribou Biosciences

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

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

Diversification Opportunities for Editas Medicine and Caribou Biosciences

0.01

Correlation Coefficient

Editas Medicine  Caribou Biosciences

Significant diversification

The 3 months correlation between Editas and Caribou is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Editas Medicine and Caribou Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Caribou Biosciences and Editas Medicine 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 Editas Medicine are associated (or correlated) with Caribou Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Caribou Biosciences has no effect on the direction of Editas Medicine i.e., Editas Medicine and Caribou Biosciences go up and down completely randomly.

Pair Corralation between Editas Medicine and Caribou Biosciences

Given the investment horizon of 90 days Editas Medicine is expected to under-perform the Caribou Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Editas Medicine is 1.09 times less risky than Caribou Biosciences. The stock trades about -0.14 of its potential returns per unit of risk. The Caribou Biosciences is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  189.00  in Caribou Biosciences on August 26, 2024 and sell it today you would earn a total of  13.00  from holding Caribou Biosciences or generate 6.88% return on investment over 90 days.

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

Editas Medicine  vs.  Caribou Biosciences

Editas Medicine

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Editas Medicine has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain comparatively stable which may send shares a bit higher in December 2024. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Caribou Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribou Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Caribou Biosciences is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Editas Medicine and Caribou Biosciences

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

The idea behind Editas Medicine and Caribou Biosciences 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.