Correlation Between Aadi Bioscience and Keros Therapeutics

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

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

Diversification Opportunities for Aadi Bioscience and Keros Therapeutics

-0.75

Correlation Coefficient

Aadi Bioscience  Keros Therapeutics

Pay attention - limited upside

The 3 months correlation between Aadi and Keros is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Aadi Bioscience and Keros Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keros Therapeutics and Aadi Bioscience 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 Aadi Bioscience are associated (or correlated) with Keros Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keros Therapeutics has no effect on the direction of Aadi Bioscience i.e., Aadi Bioscience and Keros Therapeutics go up and down completely randomly.

Pair Corralation between Aadi Bioscience and Keros Therapeutics

Given the investment horizon of 90 days Aadi Bioscience is expected to under-perform the Keros Therapeutics. In addition to that, Aadi Bioscience is 1.1 times more volatile than Keros Therapeutics. It trades about -0.02 of its total potential returns per unit of risk. Keros Therapeutics is currently generating about -0.01 per unit of volatility. If you would invest  4,986  in Keros Therapeutics on October 7, 2024 and sell it today you would lose (3,376) from holding Keros Therapeutics or give up 67.71% of portfolio value over 90 days.

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

Aadi Bioscience  vs.  Keros Therapeutics

Aadi Bioscience

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aadi Bioscience are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Aadi Bioscience demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Keros Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Keros Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Aadi Bioscience and Keros Therapeutics

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

The idea behind Aadi Bioscience and Keros 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.

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 Bonds Directory module to find actively traded corporate debentures issued by US companies.