Correlation Between Fate Therapeutics and Beam Therapeutics

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

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

Diversification Opportunities for Fate Therapeutics and Beam Therapeutics

0.46

Correlation Coefficient

Fate Therapeutics  Beam Therapeutics

Very weak diversification

The 3 months correlation between Fate and Beam is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Fate Therapeutics and Beam Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Beam Therapeutics and Fate Therapeutics 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 Fate Therapeutics are associated (or correlated) with Beam Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Beam Therapeutics has no effect on the direction of Fate Therapeutics i.e., Fate Therapeutics and Beam Therapeutics go up and down completely randomly.

Pair Corralation between Fate Therapeutics and Beam Therapeutics

Given the investment horizon of 90 days Fate Therapeutics is expected to generate 1.37 times more return on investment than Beam Therapeutics. However, Fate Therapeutics is 1.37 times more volatile than Beam Therapeutics. It trades about -0.02 of its potential returns per unit of risk. Beam Therapeutics is currently generating about -0.14 per unit of risk. If you would invest  155.00  in Fate Therapeutics on February 20, 2025 and sell it today you would lose (36.00) from holding Fate Therapeutics or give up 23.23% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Fate Therapeutics  vs.  Beam Therapeutics

Fate Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fate Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Beam Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Beam Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in June 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Fate Therapeutics and Beam Therapeutics

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

The idea behind Fate Therapeutics and Beam 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.