Correlation Between Acumen Pharmaceuticals and Karyopharm Therapeutics

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

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

Diversification Opportunities for Acumen Pharmaceuticals and Karyopharm Therapeutics

0.73

Correlation Coefficient

Acumen Pharmaceuticals  Karyopharm Therapeutics

Poor diversification

The 3 months correlation between Acumen and Karyopharm is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Acumen Pharmaceuticals and Karyopharm Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Karyopharm Therapeutics and Acumen Pharmaceuticals 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 Acumen Pharmaceuticals are associated (or correlated) with Karyopharm Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Karyopharm Therapeutics has no effect on the direction of Acumen Pharmaceuticals i.e., Acumen Pharmaceuticals and Karyopharm Therapeutics go up and down completely randomly.

Pair Corralation between Acumen Pharmaceuticals and Karyopharm Therapeutics

Given the investment horizon of 90 days Acumen Pharmaceuticals is expected to generate 1.62 times more return on investment than Karyopharm Therapeutics. However, Acumen Pharmaceuticals is 1.62 times more volatile than Karyopharm Therapeutics. It trades about -0.35 of its potential returns per unit of risk. Karyopharm Therapeutics is currently generating about -0.71 per unit of risk. If you would invest  236.00  in Acumen Pharmaceuticals on September 26, 2024 and sell it today you would lose (57.00) from holding Acumen Pharmaceuticals or give up 24.15% of portfolio value over 90 days.

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

Acumen Pharmaceuticals  vs.  Karyopharm Therapeutics

Acumen Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Karyopharm Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Karyopharm Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Acumen Pharmaceuticals and Karyopharm Therapeutics

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

The idea behind Acumen Pharmaceuticals and Karyopharm 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.