Correlation Between Akero Therapeutics and Cytokinetics

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

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

Diversification Opportunities for Akero Therapeutics and Cytokinetics

-0.17

Correlation Coefficient

Akero Therapeutics  Cytokinetics

Good diversification

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

Pair Corralation between Akero Therapeutics and Cytokinetics

Given the investment horizon of 90 days Akero Therapeutics is expected to generate 3.86 times more return on investment than Cytokinetics. However, Akero Therapeutics is 3.86 times more volatile than Cytokinetics. It trades about 0.09 of its potential returns per unit of risk. Cytokinetics is currently generating about -0.03 per unit of risk. If you would invest  2,796  in Akero Therapeutics on December 30, 2024 and sell it today you would earn a total of  1,476  from holding Akero Therapeutics or generate 52.79% return on investment over 90 days.

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

Akero Therapeutics  vs.  Cytokinetics

Akero Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Akero Therapeutics are ranked lower than 7 (%) 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.

Cytokinetics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cytokinetics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Cytokinetics is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Akero Therapeutics and Cytokinetics

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

The idea behind Akero Therapeutics and Cytokinetics 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.