Correlation Between Instil Bio and Ovid Therapeutics

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

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

Diversification Opportunities for Instil Bio and Ovid Therapeutics

0.01

Correlation Coefficient

Instil Bio  Ovid Therapeutics

Significant diversification

The 3 months correlation between Instil and Ovid is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Instil Bio and Ovid Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ovid Therapeutics and Instil 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 Instil Bio are associated (or correlated) with Ovid Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ovid Therapeutics has no effect on the direction of Instil Bio i.e., Instil Bio and Ovid Therapeutics go up and down completely randomly.

Pair Corralation between Instil Bio and Ovid Therapeutics

Considering the 90-day investment horizon Instil Bio is expected to generate 4.4 times more return on investment than Ovid Therapeutics. However, Instil Bio is 4.4 times more volatile than Ovid Therapeutics. It trades about 0.13 of its potential returns per unit of risk. Ovid Therapeutics is currently generating about 0.04 per unit of risk. If you would invest  1,393  in Instil Bio on September 2, 2024 and sell it today you would earn a total of  1,298  from holding Instil Bio or generate 93.18% return on investment over 90 days.

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

Instil Bio  vs.  Ovid Therapeutics

Instil Bio

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Instil Bio are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Instil Bio disclosed solid returns over the last few months and may actually be approaching a breakup point.

Ovid Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ovid Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Ovid Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Instil Bio and Ovid Therapeutics

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

The idea behind Instil Bio and Ovid Therapeutics 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.