Correlation Between Incannex Healthcare and Kronos Bio

Can any of the company-specific risk be diversified away by investing in both Incannex Healthcare and Kronos Bio 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 Kronos Bio 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 Kronos Bio, you can compare the effects of market volatilities on Incannex Healthcare and Kronos Bio 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 Kronos Bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Incannex Healthcare and Kronos Bio.

Diversification Opportunities for Incannex Healthcare and Kronos Bio

0.45

Correlation Coefficient

Incannex Healthcare  Kronos Bio

Very weak diversification

The 3 months correlation between Incannex and Kronos is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Incannex Healthcare Ltd and Kronos Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Bio 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 Kronos Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Bio has no effect on the direction of Incannex Healthcare i.e., Incannex Healthcare and Kronos Bio go up and down completely randomly.

Pair Corralation between Incannex Healthcare and Kronos Bio

Given the investment horizon of 90 days Incannex Healthcare Ltd is expected to under-perform the Kronos Bio. In addition to that, Incannex Healthcare is 2.64 times more volatile than Kronos Bio. It trades about -0.16 of its total potential returns per unit of risk. Kronos Bio is currently generating about -0.05 per unit of volatility. If you would invest  95.00  in Kronos Bio on December 21, 2024 and sell it today you would lose (7.00) from holding Kronos Bio or give up 7.37% of portfolio value over 90 days.

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

Incannex Healthcare Ltd  vs.  Kronos Bio

Incannex Healthcare

Risk-Adjusted Performance

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 April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Kronos Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kronos Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Incannex Healthcare and Kronos Bio

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

The idea behind Incannex Healthcare Ltd and Kronos Bio 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.