Correlation Between Avidity Biosciences and Kura Oncology

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

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

Diversification Opportunities for Avidity Biosciences and Kura Oncology

0.81

Correlation Coefficient

Avidity Biosciences  Kura Oncology

Very poor diversification

The 3 months correlation between Avidity and Kura is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Avidity Biosciences and Kura Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kura Oncology and Avidity Biosciences 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 Avidity Biosciences are associated (or correlated) with Kura Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kura Oncology has no effect on the direction of Avidity Biosciences i.e., Avidity Biosciences and Kura Oncology go up and down completely randomly.

Pair Corralation between Avidity Biosciences and Kura Oncology

Considering the 90-day investment horizon Avidity Biosciences is expected to under-perform the Kura Oncology. But the stock apears to be less risky and, when comparing its historical volatility, Avidity Biosciences is 1.03 times less risky than Kura Oncology. The stock trades about -0.03 of its potential returns per unit of risk. The Kura Oncology is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  791.00  in Kura Oncology on November 28, 2024 and sell it today you would earn a total of  8.00  from holding Kura Oncology or generate 1.01% return on investment over 90 days.

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

Avidity Biosciences  vs.  Kura Oncology

Avidity Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avidity Biosciences 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 somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Kura Oncology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kura Oncology 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 somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Avidity Biosciences and Kura Oncology

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

The idea behind Avidity Biosciences and Kura Oncology 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.

Check out your portfolio center.

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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.