Correlation Between Burning Rock and Inotiv

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

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

Diversification Opportunities for Burning Rock and Inotiv

0.28

Correlation Coefficient

Burning Rock  Inotiv

Modest diversification

The 3 months correlation between Burning and Inotiv is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Burning Rock Biotech and Inotiv Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inotiv Inc and Burning Rock 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 Burning Rock Biotech are associated (or correlated) with Inotiv. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inotiv Inc has no effect on the direction of Burning Rock i.e., Burning Rock and Inotiv go up and down completely randomly.

Pair Corralation between Burning Rock and Inotiv

Considering the 90-day investment horizon Burning Rock is expected to generate 3.45 times less return on investment than Inotiv. In addition to that, Burning Rock is 1.23 times more volatile than Inotiv Inc. It trades about 0.06 of its total potential returns per unit of risk. Inotiv Inc is currently generating about 0.23 per unit of volatility. If you would invest  146.00  in Inotiv Inc on August 31, 2024 and sell it today you would earn a total of  208.00  from holding Inotiv Inc or generate 142.47% return on investment over 90 days.

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

Burning Rock Biotech  vs.  Inotiv Inc

Burning Rock Biotech

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Inotiv Inc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Inotiv Inc are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Inotiv showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burning Rock and Inotiv

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

The idea behind Burning Rock Biotech and Inotiv Inc 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.