Correlation Between Equillium and Kodiak Sciences

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

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

Diversification Opportunities for Equillium and Kodiak Sciences

-0.67

Correlation Coefficient

Equillium  Kodiak Sciences

Excellent diversification

The 3 months correlation between Equillium and Kodiak is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Equillium and Kodiak Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Sciences and Equillium 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 Equillium are associated (or correlated) with Kodiak Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Sciences has no effect on the direction of Equillium i.e., Equillium and Kodiak Sciences go up and down completely randomly.

Pair Corralation between Equillium and Kodiak Sciences

Allowing for the 90-day total investment horizon Equillium is expected to generate 1.78 times less return on investment than Kodiak Sciences. In addition to that, Equillium is 1.0 times more volatile than Kodiak Sciences. It trades about 0.02 of its total potential returns per unit of risk. Kodiak Sciences is currently generating about 0.03 per unit of volatility. If you would invest  808.00  in Kodiak Sciences on October 22, 2024 and sell it today you would lose (91.00) from holding Kodiak Sciences or give up 11.26% of portfolio value over 90 days.

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

Equillium  vs.  Kodiak Sciences

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Kodiak Sciences

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Sciences are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Kodiak Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Equillium and Kodiak Sciences

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

The idea behind Equillium and Kodiak Sciences 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.