Correlation Between Kodiak Sciences and Burning Rock

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

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

Diversification Opportunities for Kodiak Sciences and Burning Rock

0.94

Correlation Coefficient

Kodiak Sciences  Burning Rock

Almost no diversification

The 3 months correlation between Kodiak and Burning is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Kodiak Sciences 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 Kodiak Sciences 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 Kodiak Sciences 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 Kodiak Sciences i.e., Kodiak Sciences and Burning Rock go up and down completely randomly.

Pair Corralation between Kodiak Sciences and Burning Rock

Considering the 90-day investment horizon Kodiak Sciences is expected to under-perform the Burning Rock. In addition to that, Kodiak Sciences is 2.23 times more volatile than Burning Rock Biotech. It trades about -0.13 of its total potential returns per unit of risk. Burning Rock Biotech is currently generating about 0.02 per unit of volatility. If you would invest  650.00  in Burning Rock Biotech on October 23, 2024 and sell it today you would earn a total of  3.00  from holding Burning Rock Biotech or generate 0.46% return on investment over 90 days.

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

Kodiak Sciences  vs.  Burning Rock Biotech

Kodiak Sciences

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kodiak Sciences are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather abnormal basic indicators, Kodiak Sciences exhibited solid returns over the last few months and may actually be approaching a breakup point.

Burning Rock Biotech

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 17 (%) 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 Kodiak Sciences and Burning Rock

The main advantage of trading using opposite Kodiak Sciences and Burning Rock positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kodiak Sciences 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 Kodiak Sciences 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.