Correlation Between Viatris and Kronos Bio

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

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

Diversification Opportunities for Viatris and Kronos Bio

-0.71

Correlation Coefficient

Viatris  Kronos Bio

Pay attention - limited upside

The 3 months correlation between Viatris and Kronos is -0.71. Overlapping area represents the amount of risk that can be diversified away by holding Viatris and Kronos Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Bio and Viatris 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 Viatris are associated (or correlated) with Kronos Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Bio has no effect on the direction of Viatris i.e., Viatris and Kronos Bio go up and down completely randomly.

Pair Corralation between Viatris and Kronos Bio

Given the investment horizon of 90 days Viatris is expected to generate 0.65 times more return on investment than Kronos Bio. However, Viatris is 1.53 times less risky than Kronos Bio. It trades about 0.08 of its potential returns per unit of risk. Kronos Bio is currently generating about -0.01 per unit of risk. If you would invest  1,189  in Viatris on August 31, 2024 and sell it today you would earn a total of  133.00  from holding Viatris or generate 11.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Viatris  vs.  Kronos Bio

Viatris

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Viatris are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Viatris may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Kronos Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kronos Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Kronos Bio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Viatris and Kronos Bio

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

The idea behind Viatris and Kronos Bio 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.