Correlation Between Ibio and Avenue Therapeutics

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

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

Diversification Opportunities for Ibio and Avenue Therapeutics

0.25

Correlation Coefficient

Ibio  Avenue Therapeutics

Modest diversification

The 3 months correlation between Ibio and Avenue is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Ibio Inc and Avenue Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avenue Therapeutics and Ibio 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 Ibio Inc are associated (or correlated) with Avenue Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avenue Therapeutics has no effect on the direction of Ibio i.e., Ibio and Avenue Therapeutics go up and down completely randomly.

Pair Corralation between Ibio and Avenue Therapeutics

Given the investment horizon of 90 days Ibio Inc is expected to generate 1.63 times more return on investment than Avenue Therapeutics. However, Ibio is 1.63 times more volatile than Avenue Therapeutics. It trades about 0.01 of its potential returns per unit of risk. Avenue Therapeutics is currently generating about -0.08 per unit of risk. If you would invest  1,462  in Ibio Inc on October 7, 2024 and sell it today you would lose (1,217) from holding Ibio Inc or give up 83.24% of portfolio value over 90 days.

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

Ibio Inc  vs.  Avenue Therapeutics

Ibio Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Avenue Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avenue Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, Avenue Therapeutics may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Ibio and Avenue Therapeutics

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

The idea behind Ibio Inc and Avenue Therapeutics 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.