Correlation Between Cirrus Logic and Beam TherapeuticsInc

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

By analyzing existing cross correlation between Cirrus Logic and Beam TherapeuticsInc, you can compare the effects of market volatilities on Cirrus Logic and Beam TherapeuticsInc 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 Cirrus Logic with a short position of Beam TherapeuticsInc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cirrus Logic and Beam TherapeuticsInc.

Diversification Opportunities for Cirrus Logic and Beam TherapeuticsInc

0.61

Correlation Coefficient

Cirrus Logic  Beam TherapeuticsInc

Poor diversification

The 3 months correlation between Cirrus and Beam is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Cirrus Logic and Beam TherapeuticsInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beam TherapeuticsInc and Cirrus Logic 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 Cirrus Logic are associated (or correlated) with Beam TherapeuticsInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beam TherapeuticsInc has no effect on the direction of Cirrus Logic i.e., Cirrus Logic and Beam TherapeuticsInc go up and down completely randomly.

Pair Corralation between Cirrus Logic and Beam TherapeuticsInc

Given the investment horizon of 90 days Cirrus Logic is expected to generate 0.4 times more return on investment than Beam TherapeuticsInc. However, Cirrus Logic is 2.47 times less risky than Beam TherapeuticsInc. It trades about 0.11 of its potential returns per unit of risk. Beam TherapeuticsInc is currently generating about 0.03 per unit of risk. If you would invest  6,794  in Cirrus Logic on January 30, 2024 and sell it today you would earn a total of  2,059  from holding Cirrus Logic or generate 30.31% return on investment over 90 days.

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

Cirrus Logic  vs.  Beam TherapeuticsInc

Cirrus Logic

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Cirrus Logic are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Cirrus Logic unveiled solid returns over the last few months and may actually be approaching a breakup point.

Beam TherapeuticsInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Beam TherapeuticsInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Cirrus Logic and Beam TherapeuticsInc

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

The idea behind Cirrus Logic and Beam TherapeuticsInc 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.