Correlation Between Keros Therapeutics and Ignyte Acquisition

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

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

Diversification Opportunities for Keros Therapeutics and Ignyte Acquisition

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Correlation Coefficient

Keros Therapeutics  Ignyte Acquisition

Pay attention - limited upside

The 3 months correlation between Keros and Ignyte is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Keros Therapeutics and Ignyte Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ignyte Acquisition Corp and Keros Therapeutics 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 Keros Therapeutics are associated (or correlated) with Ignyte Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ignyte Acquisition Corp has no effect on the direction of Keros Therapeutics i.e., Keros Therapeutics and Ignyte Acquisition go up and down completely randomly.

Pair Corralation between Keros Therapeutics and Ignyte Acquisition

Given the investment horizon of 90 days Keros Therapeutics is expected to generate 0.09 times more return on investment than Ignyte Acquisition. However, Keros Therapeutics is 11.38 times less risky than Ignyte Acquisition. It trades about -0.01 of its potential returns per unit of risk. Ignyte Acquisition Corp is currently generating about -0.18 per unit of risk. If you would invest  4,986  in Keros Therapeutics on October 7, 2024 and sell it today you would lose (3,376) from holding Keros Therapeutics or give up 67.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.01%
Values	Daily Returns

Keros Therapeutics  vs.  Ignyte Acquisition Corp

Keros Therapeutics

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Keros Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Ignyte Acquisition Corp

Risk-Adjusted Performance

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Very Weak

Over the last 90 days Ignyte Acquisition Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Ignyte Acquisition is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Keros Therapeutics and Ignyte Acquisition

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

The idea behind Keros Therapeutics and Ignyte Acquisition Corp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.