Correlation Between InMed Pharmaceuticals and Rain Therapeutics

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

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

Diversification Opportunities for InMed Pharmaceuticals and Rain Therapeutics

-0.32

Correlation Coefficient

InMed Pharmaceuticals  Rain Therapeutics

Very good diversification

The 3 months correlation between InMed and Rain is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding InMed Pharmaceuticals and Rain Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rain Therapeutics 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 Rain Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rain Therapeutics has no effect on the direction of InMed Pharmaceuticals i.e., InMed Pharmaceuticals and Rain Therapeutics go up and down completely randomly.

Pair Corralation between InMed Pharmaceuticals and Rain Therapeutics

Considering the 90-day investment horizon InMed Pharmaceuticals is expected to generate 1.28 times more return on investment than Rain Therapeutics. However, InMed Pharmaceuticals is 1.28 times more volatile than Rain Therapeutics. It trades about 0.01 of its potential returns per unit of risk. Rain Therapeutics is currently generating about -0.01 per unit of risk. If you would invest  2,700  in InMed Pharmaceuticals on September 16, 2024 and sell it today you would lose (2,174) from holding InMed Pharmaceuticals or give up 80.52% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	29.03%
Values	Daily Returns

InMed Pharmaceuticals  vs.  Rain Therapeutics

InMed Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

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

Rain Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with InMed Pharmaceuticals and Rain Therapeutics

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

The idea behind InMed Pharmaceuticals and Rain Therapeutics 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.