Correlation Between Incyte and Curative Biotechnology

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

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

Diversification Opportunities for Incyte and Curative Biotechnology

-0.03

Correlation Coefficient

Incyte  Curative Biotechnology

Good diversification

The 3 months correlation between Incyte and Curative is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Incyte and Curative Biotechnology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Curative Biotechnology and Incyte 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 Incyte are associated (or correlated) with Curative Biotechnology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Curative Biotechnology has no effect on the direction of Incyte i.e., Incyte and Curative Biotechnology go up and down completely randomly.

Pair Corralation between Incyte and Curative Biotechnology

Given the investment horizon of 90 days Incyte is expected to under-perform the Curative Biotechnology. But the stock apears to be less risky and, when comparing its historical volatility, Incyte is 7.02 times less risky than Curative Biotechnology. The stock trades about -0.1 of its potential returns per unit of risk. The Curative Biotechnology is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1.39  in Curative Biotechnology on December 21, 2024 and sell it today you would lose (0.11) from holding Curative Biotechnology or give up 7.63% of portfolio value over 90 days.

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

Incyte  vs.  Curative Biotechnology

Incyte

Risk-Adjusted Performance

Very Weak

Over the last 90 days Incyte 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 fundamental indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Curative Biotechnology

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Curative Biotechnology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental drivers, Curative Biotechnology unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Incyte and Curative Biotechnology

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

The idea behind Incyte and Curative Biotechnology 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.