Correlation Between Inhibikase Therapeutics and Equillium

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

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

Diversification Opportunities for Inhibikase Therapeutics and Equillium

-0.28

Correlation Coefficient

Inhibikase Therapeutics  Equillium

Very good diversification

The 3 months correlation between Inhibikase and Equillium is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Inhibikase Therapeutics and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium and Inhibikase 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 Inhibikase Therapeutics 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 Inhibikase Therapeutics i.e., Inhibikase Therapeutics and Equillium go up and down completely randomly.

Pair Corralation between Inhibikase Therapeutics and Equillium

Considering the 90-day investment horizon Inhibikase Therapeutics is expected to generate 3.54 times less return on investment than Equillium. But when comparing it to its historical volatility, Inhibikase Therapeutics is 1.22 times less risky than Equillium. It trades about 0.04 of its potential returns per unit of risk. Equillium is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  64.00  in Equillium on December 2, 2024 and sell it today you would earn a total of  12.00  from holding Equillium or generate 18.75% return on investment over 90 days.

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

Inhibikase Therapeutics  vs.  Equillium

Inhibikase Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Inhibikase Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable forward-looking signals, Inhibikase Therapeutics is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Equillium

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Equillium are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Equillium reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Inhibikase Therapeutics and Equillium

The main advantage of trading using opposite Inhibikase Therapeutics and Equillium positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Inhibikase Therapeutics 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 Inhibikase Therapeutics 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.