Correlation Between Mustang Bio and Kodiak Sciences

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

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

Diversification Opportunities for Mustang Bio and Kodiak Sciences

0.58

Correlation Coefficient

Mustang Bio  Kodiak Sciences

Very weak diversification

The 3 months correlation between Mustang and Kodiak is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Mustang Bio and Kodiak Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Sciences and Mustang Bio 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 Mustang Bio are associated (or correlated) with Kodiak Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Sciences has no effect on the direction of Mustang Bio i.e., Mustang Bio and Kodiak Sciences go up and down completely randomly.

Pair Corralation between Mustang Bio and Kodiak Sciences

Given the investment horizon of 90 days Mustang Bio is expected to under-perform the Kodiak Sciences. In addition to that, Mustang Bio is 1.18 times more volatile than Kodiak Sciences. It trades about -0.21 of its total potential returns per unit of risk. Kodiak Sciences is currently generating about -0.07 per unit of volatility. If you would invest  667.00  in Kodiak Sciences on November 28, 2024 and sell it today you would lose (244.00) from holding Kodiak Sciences or give up 36.58% of portfolio value over 90 days.

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

Mustang Bio  vs.  Kodiak Sciences

Mustang Bio

Risk-Adjusted Performance

Very Weak

Over the last 90 days Mustang Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in March 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kodiak Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kodiak Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Mustang Bio and Kodiak Sciences

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

The idea behind Mustang Bio and Kodiak Sciences 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.