Correlation Between IVERIC Bio and Karuna Therapeutics
Can any of the company-specific risk be diversified away by investing in both IVERIC Bio and Karuna 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 IVERIC Bio and Karuna Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IVERIC Bio and Karuna Therapeutics, you can compare the effects of market volatilities on IVERIC Bio and Karuna 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 IVERIC Bio with a short position of Karuna Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of IVERIC Bio and Karuna Therapeutics.
Diversification Opportunities for IVERIC Bio and Karuna Therapeutics
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between IVERIC and Karuna is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding IVERIC Bio and Karuna Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karuna Therapeutics and IVERIC Bio 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 IVERIC Bio are associated (or correlated) with Karuna Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karuna Therapeutics has no effect on the direction of IVERIC Bio i.e., IVERIC Bio and Karuna Therapeutics go up and down completely randomly.
Pair Corralation between IVERIC Bio and Karuna Therapeutics
Given the investment horizon of 90 days IVERIC Bio is expected to generate 0.56 times more return on investment than Karuna Therapeutics. However, IVERIC Bio is 1.8 times less risky than Karuna Therapeutics. It trades about 0.13 of its potential returns per unit of risk. Karuna Therapeutics is currently generating about -0.09 per unit of risk. If you would invest 3,802 in IVERIC Bio on August 27, 2024 and sell it today you would earn a total of 193.00 from holding IVERIC Bio or generate 5.08% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 83.64% |
| Values | Daily Returns |
IVERIC Bio vs. Karuna Therapeutics
Performance |
| Timeline |
| IVERIC Bio |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Karuna Therapeutics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
IVERIC Bio and Karuna Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IVERIC Bio and Karuna Therapeutics
The main advantage of trading using opposite IVERIC Bio and Karuna Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IVERIC Bio position performs unexpectedly, Karuna 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 Karuna Therapeutics will offset losses from the drop in Karuna Therapeutics' long position.| IVERIC Bio vs. Blueprint Medicines Corp | IVERIC Bio vs. Amylyx Pharmaceuticals | IVERIC Bio vs. Day One Biopharmaceuticals | IVERIC Bio vs. Immunovant |
| Karuna Therapeutics vs. Blueprint Medicines Corp | Karuna Therapeutics vs. Amylyx Pharmaceuticals | Karuna Therapeutics vs. Day One Biopharmaceuticals | Karuna Therapeutics vs. X4 Pharmaceuticals |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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