Correlation Between Revolution Medicines and SpringWorks Therapeutics

Can any of the company-specific risk be diversified away by investing in both Revolution Medicines and SpringWorks 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 SpringWorks 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 SpringWorks Therapeutics, you can compare the effects of market volatilities on Revolution Medicines and SpringWorks 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 SpringWorks Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Revolution Medicines and SpringWorks Therapeutics.

Diversification Opportunities for Revolution Medicines and SpringWorks Therapeutics

-0.32

Correlation Coefficient

Revolution Medicines  SpringWorks Therapeutics

Very good diversification

The 3 months correlation between Revolution and SpringWorks is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and SpringWorks Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpringWorks 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 SpringWorks Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpringWorks Therapeutics has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and SpringWorks Therapeutics go up and down completely randomly.

Pair Corralation between Revolution Medicines and SpringWorks Therapeutics

Given the investment horizon of 90 days Revolution Medicines is expected to under-perform the SpringWorks Therapeutics. In addition to that, Revolution Medicines is 16.34 times more volatile than SpringWorks Therapeutics. It trades about -0.05 of its total potential returns per unit of risk. SpringWorks Therapeutics is currently generating about 0.23 per unit of volatility. If you would invest  4,618  in SpringWorks Therapeutics on April 26, 2025 and sell it today you would earn a total of  81.00  from holding SpringWorks Therapeutics or generate 1.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	72.58%
Values	Daily Returns

Revolution Medicines  vs.  SpringWorks Therapeutics

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.

SpringWorks Therapeutics

Risk-Adjusted Performance

Solid

Over the last 90 days SpringWorks Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, SpringWorks Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Revolution Medicines and SpringWorks Therapeutics

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

The idea behind Revolution Medicines and SpringWorks 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.