Correlation Between Ideaya Biosciences and Keros Therapeutics

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

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

Diversification Opportunities for Ideaya Biosciences and Keros Therapeutics

0.76

Correlation Coefficient

Ideaya Biosciences  Keros Therapeutics

Poor diversification

The 3 months correlation between Ideaya and Keros is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ideaya Biosciences and Keros Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Keros Therapeutics and Ideaya Biosciences 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 Ideaya Biosciences are associated (or correlated) with Keros Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Keros Therapeutics has no effect on the direction of Ideaya Biosciences i.e., Ideaya Biosciences and Keros Therapeutics go up and down completely randomly.

Pair Corralation between Ideaya Biosciences and Keros Therapeutics

Given the investment horizon of 90 days Ideaya Biosciences is expected to generate 0.28 times more return on investment than Keros Therapeutics. However, Ideaya Biosciences is 3.57 times less risky than Keros Therapeutics. It trades about -0.14 of its potential returns per unit of risk. Keros Therapeutics is currently generating about -0.17 per unit of risk. If you would invest  2,736  in Ideaya Biosciences on November 28, 2024 and sell it today you would lose (651.00) from holding Ideaya Biosciences or give up 23.79% of portfolio value over 90 days.

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

Ideaya Biosciences  vs.  Keros Therapeutics

Ideaya Biosciences

Risk-Adjusted Performance

Very Weak

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

Keros Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Keros Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Ideaya Biosciences and Keros Therapeutics

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

The idea behind Ideaya Biosciences and Keros 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..