Correlation Between Ikena Oncology and Equillium

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

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

Diversification Opportunities for Ikena Oncology and Equillium

0.4

Correlation Coefficient

Ikena Oncology  Equillium

Very weak diversification

The 3 months correlation between Ikena and Equillium is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ikena Oncology and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium and Ikena Oncology 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 Ikena Oncology are associated (or correlated) with Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of Ikena Oncology i.e., Ikena Oncology and Equillium go up and down completely randomly.

Pair Corralation between Ikena Oncology and Equillium

Given the investment horizon of 90 days Ikena Oncology is expected to generate 2.33 times less return on investment than Equillium. But when comparing it to its historical volatility, Ikena Oncology is 1.16 times less risky than Equillium. It trades about 0.01 of its potential returns per unit of risk. Equillium is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  108.00  in Equillium on October 7, 2024 and sell it today you would lose (30.00) from holding Equillium or give up 27.78% of portfolio value over 90 days.

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

Ikena Oncology  vs.  Equillium

Ikena Oncology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ikena Oncology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Ikena Oncology is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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 relatively invariable basic indicators, Equillium is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Ikena Oncology and Equillium

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

The idea behind Ikena Oncology and Equillium 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.