Correlation Between Vericel Corp and IO Biotech

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

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

Diversification Opportunities for Vericel Corp and IO Biotech

-0.24

Correlation Coefficient

Vericel Corp  IO Biotech

Very good diversification

The 3 months correlation between Vericel and IOBT is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Vericel Corp Ord and IO Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IO Biotech and Vericel Corp 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 Vericel Corp Ord 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 Vericel Corp i.e., Vericel Corp and IO Biotech go up and down completely randomly.

Pair Corralation between Vericel Corp and IO Biotech

Given the investment horizon of 90 days Vericel Corp Ord is expected to under-perform the IO Biotech. But the stock apears to be less risky and, when comparing its historical volatility, Vericel Corp Ord is 1.68 times less risky than IO Biotech. The stock trades about -0.1 of its potential returns per unit of risk. The IO Biotech is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  94.00  in IO Biotech on December 28, 2024 and sell it today you would earn a total of  22.00  from holding IO Biotech or generate 23.4% return on investment over 90 days.

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

Vericel Corp Ord  vs.  IO Biotech

Vericel Corp Ord

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vericel Corp Ord has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

IO Biotech

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in IO Biotech are ranked lower than 8 (%) 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 Vericel Corp and IO Biotech

The main advantage of trading using opposite Vericel Corp and IO Biotech positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vericel Corp 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 Vericel Corp Ord 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.