Correlation Between InMed Pharmaceuticals and Kronos Bio

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

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

Diversification Opportunities for InMed Pharmaceuticals and Kronos Bio

0.27

Correlation Coefficient

InMed Pharmaceuticals  Kronos Bio

Modest diversification

The 3 months correlation between InMed and Kronos is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding InMed Pharmaceuticals and Kronos Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Bio and InMed Pharmaceuticals 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 InMed Pharmaceuticals 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 InMed Pharmaceuticals i.e., InMed Pharmaceuticals and Kronos Bio go up and down completely randomly.

Pair Corralation between InMed Pharmaceuticals and Kronos Bio

Considering the 90-day investment horizon InMed Pharmaceuticals is expected to generate 1.81 times more return on investment than Kronos Bio. However, InMed Pharmaceuticals is 1.81 times more volatile than Kronos Bio. It trades about 0.23 of its potential returns per unit of risk. Kronos Bio is currently generating about 0.14 per unit of risk. If you would invest  414.00  in InMed Pharmaceuticals on October 20, 2024 and sell it today you would earn a total of  81.00  from holding InMed Pharmaceuticals or generate 19.57% return on investment over 90 days.

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

InMed Pharmaceuticals  vs.  Kronos Bio

InMed Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days InMed Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, InMed Pharmaceuticals is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Kronos Bio

Risk-Adjusted Performance

2 of 100

Weak

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 unfluctuating basic indicators, Kronos Bio may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with InMed Pharmaceuticals and Kronos Bio

The main advantage of trading using opposite InMed Pharmaceuticals and Kronos Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if InMed Pharmaceuticals 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 InMed Pharmaceuticals 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.