Correlation Between Arrowhead Pharmaceuticals and Kiniksa Pharmaceuticals

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

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

Diversification Opportunities for Arrowhead Pharmaceuticals and Kiniksa Pharmaceuticals

-0.2

Correlation Coefficient

Arrowhead Pharmaceuticals  Kiniksa Pharmaceuticals

Good diversification

The 3 months correlation between Arrowhead and Kiniksa is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Arrowhead Pharmaceuticals and Kiniksa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kiniksa Pharmaceuticals and Arrowhead 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 Arrowhead Pharmaceuticals are associated (or correlated) with Kiniksa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kiniksa Pharmaceuticals has no effect on the direction of Arrowhead Pharmaceuticals i.e., Arrowhead Pharmaceuticals and Kiniksa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Arrowhead Pharmaceuticals and Kiniksa Pharmaceuticals

Given the investment horizon of 90 days Arrowhead Pharmaceuticals is expected to under-perform the Kiniksa Pharmaceuticals. In addition to that, Arrowhead Pharmaceuticals is 1.42 times more volatile than Kiniksa Pharmaceuticals. It trades about -0.05 of its total potential returns per unit of risk. Kiniksa Pharmaceuticals is currently generating about 0.02 per unit of volatility. If you would invest  1,880  in Kiniksa Pharmaceuticals on October 5, 2024 and sell it today you would earn a total of  114.00  from holding Kiniksa Pharmaceuticals or generate 6.06% return on investment over 90 days.

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

Arrowhead Pharmaceuticals  vs.  Kiniksa Pharmaceuticals

Arrowhead Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrowhead Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Arrowhead Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Kiniksa Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Arrowhead Pharmaceuticals and Kiniksa Pharmaceuticals

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

The idea behind Arrowhead Pharmaceuticals and Kiniksa Pharmaceuticals 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.