Correlation Between Revolution Medicines and RAPT Therapeutics

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

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

Diversification Opportunities for Revolution Medicines and RAPT Therapeutics

-0.4

Correlation Coefficient

Revolution Medicines  RAPT Therapeutics

Very good diversification

The 3 months correlation between Revolution and RAPT is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and RAPT Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAPT Therapeutics 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 RAPT Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAPT Therapeutics has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and RAPT Therapeutics go up and down completely randomly.

Pair Corralation between Revolution Medicines and RAPT Therapeutics

Given the investment horizon of 90 days Revolution Medicines is expected to under-perform the RAPT Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Revolution Medicines is 4.12 times less risky than RAPT Therapeutics. The stock trades about -0.09 of its potential returns per unit of risk. The RAPT Therapeutics is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  598.00  in RAPT Therapeutics on May 13, 2025 and sell it today you would earn a total of  357.00  from holding RAPT Therapeutics or generate 59.7% return on investment over 90 days.

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

Revolution Medicines  vs.  RAPT Therapeutics

Revolution Medicines

Risk-Adjusted Performance

Weakest

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.

RAPT Therapeutics

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in RAPT Therapeutics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, RAPT Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Revolution Medicines and RAPT Therapeutics

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

The idea behind Revolution Medicines and RAPT Therapeutics 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.