Correlation Between Revolution Medicines and Replimune

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

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

Diversification Opportunities for Revolution Medicines and Replimune

0.26

Correlation Coefficient

Revolution Medicines  Replimune

Modest diversification

The 3 months correlation between Revolution and Replimune is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and Replimune Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Replimune Group 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 Replimune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Replimune Group has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and Replimune go up and down completely randomly.

Pair Corralation between Revolution Medicines and Replimune

Given the investment horizon of 90 days Revolution Medicines is expected to under-perform the Replimune. But the stock apears to be less risky and, when comparing its historical volatility, Revolution Medicines is 6.4 times less risky than Replimune. The stock trades about -0.04 of its potential returns per unit of risk. The Replimune Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,001  in Replimune Group on May 5, 2025 and sell it today you would lose (241.00) from holding Replimune Group or give up 24.08% of portfolio value over 90 days.

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

Revolution Medicines  vs.  Replimune Group

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.

Replimune Group

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Replimune Group are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Replimune disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Revolution Medicines and Replimune

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

The idea behind Revolution Medicines and Replimune Group 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.