Correlation Between Rhythm Pharmaceuticals and Kura Oncology

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

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

Diversification Opportunities for Rhythm Pharmaceuticals and Kura Oncology

-0.54

Correlation Coefficient

Rhythm Pharmaceuticals  Kura Oncology

Excellent diversification

The 3 months correlation between Rhythm and Kura is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding Rhythm Pharmaceuticals and Kura Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kura Oncology and Rhythm Pharmaceuticals 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 Rhythm Pharmaceuticals 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 Rhythm Pharmaceuticals i.e., Rhythm Pharmaceuticals and Kura Oncology go up and down completely randomly.

Pair Corralation between Rhythm Pharmaceuticals and Kura Oncology

Given the investment horizon of 90 days Rhythm Pharmaceuticals is expected to generate 0.61 times more return on investment than Kura Oncology. However, Rhythm Pharmaceuticals is 1.64 times less risky than Kura Oncology. It trades about 0.17 of its potential returns per unit of risk. Kura Oncology is currently generating about -0.15 per unit of risk. If you would invest  4,595  in Rhythm Pharmaceuticals on August 31, 2024 and sell it today you would earn a total of  1,630  from holding Rhythm Pharmaceuticals or generate 35.47% return on investment over 90 days.

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

Rhythm Pharmaceuticals  vs.  Kura Oncology

Rhythm Pharmaceuticals

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rhythm Pharmaceuticals are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Rhythm Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Kura Oncology

Risk-Adjusted Performance

0 of 100

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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Rhythm Pharmaceuticals and Kura Oncology

The main advantage of trading using opposite Rhythm Pharmaceuticals and Kura Oncology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rhythm Pharmaceuticals 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 Rhythm Pharmaceuticals 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.

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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.