Correlation Between Innate Pharma and Sellas Life

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

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

Diversification Opportunities for Innate Pharma and Sellas Life

0.03

Correlation Coefficient

Innate Pharma  Sellas Life

Significant diversification

The 3 months correlation between Innate and Sellas is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Innate Pharma and Sellas Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sellas Life Sciences 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 Sellas Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sellas Life Sciences has no effect on the direction of Innate Pharma i.e., Innate Pharma and Sellas Life go up and down completely randomly.

Pair Corralation between Innate Pharma and Sellas Life

Given the investment horizon of 90 days Innate Pharma is expected to generate 35.39 times less return on investment than Sellas Life. But when comparing it to its historical volatility, Innate Pharma is 1.47 times less risky than Sellas Life. It trades about 0.0 of its potential returns per unit of risk. Sellas Life Sciences is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  98.00  in Sellas Life Sciences on December 27, 2024 and sell it today you would earn a total of  18.00  from holding Sellas Life Sciences or generate 18.37% return on investment over 90 days.

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

Innate Pharma  vs.  Sellas Life Sciences

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.

Sellas Life Sciences

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sellas Life Sciences are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Sellas Life unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Innate Pharma and Sellas Life

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

The idea behind Innate Pharma and Sellas Life Sciences 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.