Correlation Between Revolution Medicines and Phathom Pharmaceuticals

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

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

Diversification Opportunities for Revolution Medicines and Phathom Pharmaceuticals

-0.34

Correlation Coefficient

Revolution Medicines  Phathom Pharmaceuticals

Very good diversification

The 3 months correlation between Revolution and Phathom is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and Phathom Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phathom Pharmaceuticals 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 Phathom Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phathom Pharmaceuticals has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and Phathom Pharmaceuticals go up and down completely randomly.

Pair Corralation between Revolution Medicines and Phathom Pharmaceuticals

Given the investment horizon of 90 days Revolution Medicines is expected to under-perform the Phathom Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Revolution Medicines is 4.86 times less risky than Phathom Pharmaceuticals. The stock trades about -0.04 of its potential returns per unit of risk. The Phathom Pharmaceuticals is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  258.00  in Phathom Pharmaceuticals on May 4, 2025 and sell it today you would earn a total of  577.00  from holding Phathom Pharmaceuticals or generate 223.64% return on investment over 90 days.

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

Revolution Medicines  vs.  Phathom Pharmaceuticals

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.

Phathom Pharmaceuticals

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phathom Pharmaceuticals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Phathom Pharmaceuticals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Revolution Medicines and Phathom Pharmaceuticals

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

The idea behind Revolution Medicines and Phathom Pharmaceuticals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.