Correlation Between Sol Gel and Foghorn Therapeutics

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

By analyzing existing cross correlation between Sol Gel Technologies and Foghorn Therapeutics, you can compare the effects of market volatilities on Sol Gel and Foghorn 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 Sol Gel with a short position of Foghorn Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sol Gel and Foghorn Therapeutics.

Diversification Opportunities for Sol Gel and Foghorn Therapeutics

0.63

Correlation Coefficient

Sol Gel  Foghorn Therapeutics

Poor diversification

The 3 months correlation between Sol and Foghorn is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Sol Gel Technologies and Foghorn Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Foghorn Therapeutics and Sol Gel 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 Sol Gel Technologies are associated (or correlated) with Foghorn Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Foghorn Therapeutics has no effect on the direction of Sol Gel i.e., Sol Gel and Foghorn Therapeutics go up and down completely randomly.

Pair Corralation between Sol Gel and Foghorn Therapeutics

Given the investment horizon of 90 days Sol Gel Technologies is expected to generate 2.19 times more return on investment than Foghorn Therapeutics. However, Sol Gel is 2.19 times more volatile than Foghorn Therapeutics. It trades about 0.21 of its potential returns per unit of risk. Foghorn Therapeutics is currently generating about 0.13 per unit of risk. If you would invest  442.00  in Sol Gel Technologies on May 3, 2025 and sell it today you would earn a total of  858.00  from holding Sol Gel Technologies or generate 194.12% return on investment over 90 days.

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

Sol Gel Technologies  vs.  Foghorn Therapeutics

Sol Gel Technologies

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sol Gel Technologies are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Sol Gel disclosed solid returns over the last few months and may actually be approaching a breakup point.

Foghorn Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Foghorn Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Foghorn Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sol Gel and Foghorn Therapeutics

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

The idea behind Sol Gel Technologies and Foghorn 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.