Correlation Between Revolution Medicines and Third Harmonic

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

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

Diversification Opportunities for Revolution Medicines and Third Harmonic

-0.47

Correlation Coefficient

Revolution Medicines  Third Harmonic

Very good diversification

The 3 months correlation between Revolution and Third is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Revolution Medicines and Third Harmonic Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Third Harmonic Bio 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 Third Harmonic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Third Harmonic Bio has no effect on the direction of Revolution Medicines i.e., Revolution Medicines and Third Harmonic go up and down completely randomly.

Pair Corralation between Revolution Medicines and Third Harmonic

Given the investment horizon of 90 days Revolution Medicines is expected to under-perform the Third Harmonic. In addition to that, Revolution Medicines is 4.66 times more volatile than Third Harmonic Bio. It trades about -0.06 of its total potential returns per unit of risk. Third Harmonic Bio is currently generating about 0.15 per unit of volatility. If you would invest  515.00  in Third Harmonic Bio on May 9, 2025 and sell it today you would earn a total of  23.00  from holding Third Harmonic Bio or generate 4.47% 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.  Third Harmonic Bio

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.

Third Harmonic Bio

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Third Harmonic Bio are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Third Harmonic is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Revolution Medicines and Third Harmonic

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

The idea behind Revolution Medicines and Third Harmonic Bio 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.