Correlation Between Akero Therapeutics and Roivant Sciences

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

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

Diversification Opportunities for Akero Therapeutics and Roivant Sciences

0.41

Correlation Coefficient

Akero Therapeutics  Roivant Sciences

Very weak diversification

The 3 months correlation between Akero and Roivant is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Akero Therapeutics and Roivant Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Roivant Sciences and Akero Therapeutics 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 Akero Therapeutics are associated (or correlated) with Roivant Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Roivant Sciences has no effect on the direction of Akero Therapeutics i.e., Akero Therapeutics and Roivant Sciences go up and down completely randomly.

Pair Corralation between Akero Therapeutics and Roivant Sciences

Given the investment horizon of 90 days Akero Therapeutics is expected to generate 1.9 times more return on investment than Roivant Sciences. However, Akero Therapeutics is 1.9 times more volatile than Roivant Sciences. It trades about 0.03 of its potential returns per unit of risk. Roivant Sciences is currently generating about -0.02 per unit of risk. If you would invest  2,837  in Akero Therapeutics on September 22, 2024 and sell it today you would earn a total of  97.00  from holding Akero Therapeutics or generate 3.42% return on investment over 90 days.

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

Akero Therapeutics  vs.  Roivant Sciences

Akero Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

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

Roivant Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roivant Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable forward indicators, Roivant Sciences is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Akero Therapeutics and Roivant Sciences

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

The idea behind Akero Therapeutics and Roivant Sciences 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.