Correlation Between Innovent Biologics and Relay Therapeutics

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

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

Diversification Opportunities for Innovent Biologics and Relay Therapeutics

0.52

Correlation Coefficient

Innovent Biologics  Relay Therapeutics

Very weak diversification

The 3 months correlation between Innovent and Relay is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Innovent Biologics and Relay Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relay Therapeutics and Innovent Biologics 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 Innovent Biologics are associated (or correlated) with Relay Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relay Therapeutics has no effect on the direction of Innovent Biologics i.e., Innovent Biologics and Relay Therapeutics go up and down completely randomly.

Pair Corralation between Innovent Biologics and Relay Therapeutics

Assuming the 90 days horizon Innovent Biologics is expected to generate 0.49 times more return on investment than Relay Therapeutics. However, Innovent Biologics is 2.02 times less risky than Relay Therapeutics. It trades about -0.02 of its potential returns per unit of risk. Relay Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  529.00  in Innovent Biologics on September 3, 2024 and sell it today you would lose (44.00) from holding Innovent Biologics or give up 8.32% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Innovent Biologics  vs.  Relay Therapeutics

Innovent Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Innovent Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Innovent Biologics is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Relay Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Relay Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Innovent Biologics and Relay Therapeutics

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

The idea behind Innovent Biologics and Relay 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.