Correlation Between Innate Pharma and Biocardia

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

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

Diversification Opportunities for Innate Pharma and Biocardia

-0.04

Correlation Coefficient

Innate Pharma  Biocardia

Good diversification

The 3 months correlation between Innate and Biocardia is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Innate Pharma and Biocardia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Biocardia 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 Biocardia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Biocardia has no effect on the direction of Innate Pharma i.e., Innate Pharma and Biocardia go up and down completely randomly.

Pair Corralation between Innate Pharma and Biocardia

Given the investment horizon of 90 days Innate Pharma is expected to generate 15.58 times less return on investment than Biocardia. But when comparing it to its historical volatility, Innate Pharma is 1.15 times less risky than Biocardia. It trades about 0.01 of its potential returns per unit of risk. Biocardia is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  201.00  in Biocardia on December 21, 2024 and sell it today you would earn a total of  46.00  from holding Biocardia or generate 22.89% return on investment over 90 days.

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

Innate Pharma  vs.  Biocardia

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Biocardia

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Biocardia are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, Biocardia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innate Pharma and Biocardia

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

The idea behind Innate Pharma and Biocardia 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.