Correlation Between Akero Therapeutics and Cabaletta Bio

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

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

Diversification Opportunities for Akero Therapeutics and Cabaletta Bio

-0.01

Correlation Coefficient

Akero Therapeutics  Cabaletta Bio

Good diversification

The 3 months correlation between Akero and Cabaletta is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Akero Therapeutics and Cabaletta Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cabaletta Bio 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 Cabaletta Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cabaletta Bio has no effect on the direction of Akero Therapeutics i.e., Akero Therapeutics and Cabaletta Bio go up and down completely randomly.

Pair Corralation between Akero Therapeutics and Cabaletta Bio

Given the investment horizon of 90 days Akero Therapeutics is expected to generate 0.74 times more return on investment than Cabaletta Bio. However, Akero Therapeutics is 1.36 times less risky than Cabaletta Bio. It trades about 0.01 of its potential returns per unit of risk. Cabaletta Bio is currently generating about -0.01 per unit of risk. If you would invest  4,949  in Akero Therapeutics on September 23, 2024 and sell it today you would lose (2,015) from holding Akero Therapeutics or give up 40.72% of portfolio value over 90 days.

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

Akero Therapeutics  vs.  Cabaletta Bio

Akero Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Akero Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Akero Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cabaletta Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cabaletta Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Akero Therapeutics and Cabaletta Bio

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

The idea behind Akero Therapeutics and Cabaletta Bio 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.