Correlation Between Incannex Healthcare and Burning Rock

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

By analyzing existing cross correlation between Incannex Healthcare Ltd and Burning Rock Biotech, you can compare the effects of market volatilities on Incannex Healthcare and Burning Rock 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 Incannex Healthcare with a short position of Burning Rock. Check out your portfolio center. Please also check ongoing floating volatility patterns of Incannex Healthcare and Burning Rock.

Diversification Opportunities for Incannex Healthcare and Burning Rock

-0.51

Correlation Coefficient

Incannex Healthcare  Burning Rock

Excellent diversification

The 3 months correlation between Incannex and Burning is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Incannex Healthcare Ltd and Burning Rock Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burning Rock Biotech and Incannex Healthcare 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 Incannex Healthcare Ltd are associated (or correlated) with Burning Rock. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burning Rock Biotech has no effect on the direction of Incannex Healthcare i.e., Incannex Healthcare and Burning Rock go up and down completely randomly.

Pair Corralation between Incannex Healthcare and Burning Rock

Given the investment horizon of 90 days Incannex Healthcare Ltd is expected to under-perform the Burning Rock. In addition to that, Incannex Healthcare is 1.68 times more volatile than Burning Rock Biotech. It trades about -0.05 of its total potential returns per unit of risk. Burning Rock Biotech is currently generating about -0.04 per unit of volatility. If you would invest  704.00  in Burning Rock Biotech on October 26, 2024 and sell it today you would lose (22.00) from holding Burning Rock Biotech or give up 3.12% of portfolio value over 90 days.

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

Incannex Healthcare Ltd  vs.  Burning Rock Biotech

Incannex Healthcare

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Incannex Healthcare Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Burning Rock Biotech

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Incannex Healthcare and Burning Rock

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

The idea behind Incannex Healthcare Ltd and Burning Rock Biotech 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..