Correlation Between Innate Pharma and AB Science

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

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

Diversification Opportunities for Innate Pharma and AB Science

-0.44

Correlation Coefficient

Innate Pharma  AB Science

Very good diversification

The 3 months correlation between Innate and AB Science is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Innate Pharma and AB Science SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AB Science SA and Innate Pharma 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 Innate Pharma are associated (or correlated) with AB Science. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AB Science SA has no effect on the direction of Innate Pharma i.e., Innate Pharma and AB Science go up and down completely randomly.

Pair Corralation between Innate Pharma and AB Science

Assuming the 90 days trading horizon Innate Pharma is expected to under-perform the AB Science. But the stock apears to be less risky and, when comparing its historical volatility, Innate Pharma is 3.96 times less risky than AB Science. The stock trades about -0.01 of its potential returns per unit of risk. The AB Science SA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  89.00  in AB Science SA on December 30, 2024 and sell it today you would earn a total of  47.00  from holding AB Science SA or generate 52.81% return on investment over 90 days.

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

Innate Pharma  vs.  AB Science SA

Innate Pharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days Innate Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, Innate Pharma is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

AB Science SA

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AB Science SA are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AB Science sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innate Pharma and AB Science

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

The idea behind Innate Pharma and AB Science SA 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.