Correlation Between PepGen and IO Biotech

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

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

Diversification Opportunities for PepGen and IO Biotech

0.58

Correlation Coefficient

PepGen  IO Biotech

Very weak diversification

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

Pair Corralation between PepGen and IO Biotech

Given the investment horizon of 90 days PepGen is expected to generate 1.01 times more return on investment than IO Biotech. However, PepGen is 1.01 times more volatile than IO Biotech. It trades about 0.06 of its potential returns per unit of risk. IO Biotech is currently generating about -0.04 per unit of risk. If you would invest  449.00  in PepGen on September 15, 2024 and sell it today you would earn a total of  19.00  from holding PepGen or generate 4.23% return on investment over 90 days.

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

PepGen  vs.  IO Biotech

PepGen

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PepGen has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

IO Biotech

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IO Biotech are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, IO Biotech unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PepGen and IO Biotech

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

The idea behind PepGen and IO 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.