Correlation Between Kane Biotech and Lumos Pharma
Can any of the company-specific risk be diversified away by investing in both Kane Biotech and Lumos Pharma 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 Kane Biotech and Lumos Pharma into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kane Biotech and Lumos Pharma, you can compare the effects of market volatilities on Kane Biotech and Lumos Pharma 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 Kane Biotech with a short position of Lumos Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kane Biotech and Lumos Pharma.
Diversification Opportunities for Kane Biotech and Lumos Pharma
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Kane and Lumos is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kane Biotech and Lumos Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lumos Pharma and Kane Biotech 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 Kane Biotech are associated (or correlated) with Lumos Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lumos Pharma has no effect on the direction of Kane Biotech i.e., Kane Biotech and Lumos Pharma go up and down completely randomly.
Pair Corralation between Kane Biotech and Lumos Pharma
Assuming the 90 days horizon Kane Biotech is expected to generate 1.17 times less return on investment than Lumos Pharma. In addition to that, Kane Biotech is 1.1 times more volatile than Lumos Pharma. It trades about 0.03 of its total potential returns per unit of risk. Lumos Pharma is currently generating about 0.04 per unit of volatility. If you would invest 317.00 in Lumos Pharma on August 28, 2024 and sell it today you would earn a total of 113.00 from holding Lumos Pharma or generate 35.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.72% |
| Values | Daily Returns |
Kane Biotech vs. Lumos Pharma
Performance |
| Timeline |
| Kane Biotech |
| Lumos Pharma |
Kane Biotech and Lumos Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kane Biotech and Lumos Pharma
The main advantage of trading using opposite Kane Biotech and Lumos Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kane Biotech position performs unexpectedly, Lumos Pharma 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 Lumos Pharma will offset losses from the drop in Lumos Pharma's long position.The idea behind Kane Biotech and Lumos Pharma 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.| Lumos Pharma vs. Shattuck Labs | Lumos Pharma vs. Eliem Therapeutics | Lumos Pharma vs. Champions Oncology | Lumos Pharma vs. Century Therapeutics |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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