Correlation Between Incyte and Kronos Bio

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

By analyzing existing cross correlation between Incyte and Kronos Bio, you can compare the effects of market volatilities on Incyte and Kronos Bio 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 Kronos Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Incyte and Kronos Bio.

Diversification Opportunities for Incyte and Kronos Bio

-0.33

Correlation Coefficient

Incyte  Kronos Bio

Very good diversification

The 3 months correlation between Incyte and Kronos is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Incyte and Kronos Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Bio 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 Kronos Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Bio has no effect on the direction of Incyte i.e., Incyte and Kronos Bio go up and down completely randomly.

Pair Corralation between Incyte and Kronos Bio

Given the investment horizon of 90 days Incyte is expected to generate 0.75 times more return on investment than Kronos Bio. However, Incyte is 1.32 times less risky than Kronos Bio. It trades about 0.0 of its potential returns per unit of risk. Kronos Bio is currently generating about -0.22 per unit of risk. If you would invest  7,211  in Incyte on October 9, 2024 and sell it today you would lose (20.00) from holding Incyte or give up 0.28% of portfolio value over 90 days.

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

Incyte  vs.  Kronos Bio

Incyte

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Incyte are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Incyte may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Kronos Bio

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kronos Bio are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Kronos Bio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Incyte and Kronos Bio

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

The idea behind Incyte and Kronos Bio 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.

Check out your portfolio center.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.