Correlation Between Foghorn Therapeutics and Kronos Bio

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

Diversification Opportunities for Foghorn Therapeutics and Kronos Bio

-0.25

Correlation Coefficient

Foghorn Therapeutics  Kronos Bio

Very good diversification

The 3 months correlation between Foghorn and Kronos is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Foghorn Therapeutics and Kronos Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Bio and Foghorn 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 Foghorn 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 Foghorn Therapeutics i.e., Foghorn Therapeutics and Kronos Bio go up and down completely randomly.

Pair Corralation between Foghorn Therapeutics and Kronos Bio

Given the investment horizon of 90 days Foghorn Therapeutics is expected to under-perform the Kronos Bio. In addition to that, Foghorn Therapeutics is 1.14 times more volatile than Kronos Bio. It trades about -0.22 of its total potential returns per unit of risk. Kronos Bio is currently generating about 0.03 per unit of volatility. If you would invest  94.00  in Kronos Bio on September 17, 2024 and sell it today you would earn a total of  1.82  from holding Kronos Bio or generate 1.94% return on investment over 90 days.

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

Foghorn Therapeutics  vs.  Kronos Bio

Foghorn Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kronos Bio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kronos Bio are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Kronos Bio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Foghorn Therapeutics and Kronos Bio

The main advantage of trading using opposite Foghorn Therapeutics and Kronos Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Foghorn 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 Foghorn 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.