Correlation Between Keros Therapeutics and Revolution Medicines

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

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

Diversification Opportunities for Keros Therapeutics and Revolution Medicines

0.14

Correlation Coefficient

Keros Therapeutics  Revolution Medicines

Average diversification

The 3 months correlation between Keros and Revolution is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Keros Therapeutics and Revolution Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Medicines and Keros 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 Keros Therapeutics are associated (or correlated) with Revolution Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Medicines has no effect on the direction of Keros Therapeutics i.e., Keros Therapeutics and Revolution Medicines go up and down completely randomly.

Pair Corralation between Keros Therapeutics and Revolution Medicines

Given the investment horizon of 90 days Keros Therapeutics is expected to generate 0.72 times more return on investment than Revolution Medicines. However, Keros Therapeutics is 1.38 times less risky than Revolution Medicines. It trades about 0.04 of its potential returns per unit of risk. Revolution Medicines is currently generating about 0.0 per unit of risk. If you would invest  1,376  in Keros Therapeutics on May 6, 2025 and sell it today you would earn a total of  56.00  from holding Keros Therapeutics or generate 4.07% return on investment over 90 days.

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

Keros Therapeutics  vs.  Revolution Medicines

Keros Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Keros Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Keros Therapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Revolution Medicines

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Keros Therapeutics and Revolution Medicines

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

The idea behind Keros Therapeutics and Revolution Medicines 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.