Correlation Between Akero Therapeutics and Kronos Bio

Can any of the company-specific risk be diversified away by investing in both Akero Therapeutics and Kronos 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 Kronos 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 Kronos Bio, you can compare the effects of market volatilities on Akero Therapeutics and Kronos 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 Kronos Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Akero Therapeutics and Kronos Bio.

Diversification Opportunities for Akero Therapeutics and Kronos Bio

-0.45

Correlation Coefficient

Akero Therapeutics  Kronos Bio

Very good diversification

The 3 months correlation between Akero and Kronos is -0.45. Overlapping area represents the amount of risk that can be diversified away by holding Akero Therapeutics and Kronos Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos 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 Kronos Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Bio has no effect on the direction of Akero Therapeutics i.e., Akero Therapeutics and Kronos Bio go up and down completely randomly.

Pair Corralation between Akero Therapeutics and Kronos Bio

Given the investment horizon of 90 days Akero Therapeutics is expected to generate 0.88 times more return on investment than Kronos Bio. However, Akero Therapeutics is 1.14 times less risky than Kronos Bio. It trades about 0.12 of its potential returns per unit of risk. Kronos Bio is currently generating about -0.01 per unit of risk. If you would invest  2,599  in Akero Therapeutics on September 3, 2024 and sell it today you would earn a total of  611.00  from holding Akero Therapeutics or generate 23.51% return on investment over 90 days.

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

Akero Therapeutics  vs.  Kronos Bio

Akero Therapeutics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Akero Therapeutics are ranked lower than 9 (%) 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.

Kronos Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kronos Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Kronos Bio is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Akero Therapeutics and Kronos Bio

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

The idea behind Akero Therapeutics and Kronos 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.