Correlation Between Akero Therapeutics and Black Diamond

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

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

Diversification Opportunities for Akero Therapeutics and Black Diamond

0.17

Correlation Coefficient

Akero Therapeutics  Black Diamond

Average diversification

The 3 months correlation between Akero and Black is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Akero Therapeutics and Black Diamond Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Diamond Therap and Akero 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 Akero Therapeutics are associated (or correlated) with Black Diamond. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Diamond Therap has no effect on the direction of Akero Therapeutics i.e., Akero Therapeutics and Black Diamond go up and down completely randomly.

Pair Corralation between Akero Therapeutics and Black Diamond

Given the investment horizon of 90 days Akero Therapeutics is expected to generate 2.65 times more return on investment than Black Diamond. However, Akero Therapeutics is 2.65 times more volatile than Black Diamond Therapeutics. It trades about 0.11 of its potential returns per unit of risk. Black Diamond Therapeutics is currently generating about 0.01 per unit of risk. If you would invest  3,064  in Akero Therapeutics on November 20, 2024 and sell it today you would earn a total of  1,988  from holding Akero Therapeutics or generate 64.88% return on investment over 90 days.

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

Akero Therapeutics  vs.  Black Diamond Therapeutics

Akero Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Akero Therapeutics are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Akero Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Black Diamond Therap

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Black Diamond Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Black Diamond is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Akero Therapeutics and Black Diamond

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

The idea behind Akero Therapeutics and Black Diamond 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.