Correlation Between Revolution Medicines and IGM Biosciences

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

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

Diversification Opportunities for Revolution Medicines and IGM Biosciences

-0.1

Correlation Coefficient

Revolution Medicines  IGM Biosciences

Good diversification

The 3 months correlation between Revolution and IGM is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and IGM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Biosciences and Revolution Medicines 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 Revolution Medicines are associated (or correlated) with IGM Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Biosciences has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and IGM Biosciences go up and down completely randomly.

Pair Corralation between Revolution Medicines and IGM Biosciences

Given the investment horizon of 90 days Revolution Medicines is expected to under-perform the IGM Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Revolution Medicines is 1.41 times less risky than IGM Biosciences. The stock trades about -0.04 of its potential returns per unit of risk. The IGM Biosciences is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  139.00  in IGM Biosciences on April 30, 2025 and sell it today you would lose (13.00) from holding IGM Biosciences or give up 9.35% of portfolio value over 90 days.

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

Revolution Medicines  vs.  IGM Biosciences

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 latest weak performance, the Stock's primary indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

IGM Biosciences

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Revolution Medicines and IGM Biosciences

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

The idea behind Revolution Medicines and IGM 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.

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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.