Correlation Between Olema Pharmaceuticals and Sana Biotechnology

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

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

Diversification Opportunities for Olema Pharmaceuticals and Sana Biotechnology

-0.14

Correlation Coefficient

Olema Pharmaceuticals  Sana Biotechnology

Good diversification

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

Pair Corralation between Olema Pharmaceuticals and Sana Biotechnology

Given the investment horizon of 90 days Olema Pharmaceuticals is expected to generate 0.56 times more return on investment than Sana Biotechnology. However, Olema Pharmaceuticals is 1.79 times less risky than Sana Biotechnology. It trades about 0.17 of its potential returns per unit of risk. Sana Biotechnology is currently generating about -0.35 per unit of risk. If you would invest  1,173  in Olema Pharmaceuticals on August 14, 2024 and sell it today you would earn a total of  99.00  from holding Olema Pharmaceuticals or generate 8.44% return on investment over 90 days.

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

Olema Pharmaceuticals  vs.  Sana Biotechnology

Olema Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Olema Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Olema Pharmaceuticals may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Sana Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sana Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Olema Pharmaceuticals and Sana Biotechnology

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

The idea behind Olema Pharmaceuticals and Sana Biotechnology 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.