Correlation Between Insmed and Akero Therapeutics

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

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

Diversification Opportunities for Insmed and Akero Therapeutics

0.01

Correlation Coefficient

Insmed  Akero Therapeutics

Significant diversification

The 3 months correlation between Insmed and Akero is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Insmed Inc and Akero Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akero Therapeutics and Insmed 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 Insmed Inc are associated (or correlated) with Akero Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akero Therapeutics has no effect on the direction of Insmed i.e., Insmed and Akero Therapeutics go up and down completely randomly.

Pair Corralation between Insmed and Akero Therapeutics

Given the investment horizon of 90 days Insmed Inc is expected to under-perform the Akero Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Insmed Inc is 1.25 times less risky than Akero Therapeutics. The stock trades about 0.0 of its potential returns per unit of risk. The Akero Therapeutics is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,734  in Akero Therapeutics on September 13, 2024 and sell it today you would earn a total of  169.00  from holding Akero Therapeutics or generate 6.18% return on investment over 90 days.

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

Insmed Inc  vs.  Akero Therapeutics

Insmed Inc

Risk-Adjusted Performance

0 of 100

Very Weak

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

Akero Therapeutics

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Akero Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Akero Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Insmed and Akero Therapeutics

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

The idea behind Insmed Inc and Akero 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.

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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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.