Correlation Between Arcutis Biotherapeutics and Immunovant

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

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

Diversification Opportunities for Arcutis Biotherapeutics and Immunovant

0.09

Correlation Coefficient

Arcutis Biotherapeutics  Immunovant

Significant diversification

The 3 months correlation between Arcutis and Immunovant is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Arcutis Biotherapeutics and Immunovant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Immunovant and Arcutis Biotherapeutics 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 Arcutis Biotherapeutics are associated (or correlated) with Immunovant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Immunovant has no effect on the direction of Arcutis Biotherapeutics i.e., Arcutis Biotherapeutics and Immunovant go up and down completely randomly.

Pair Corralation between Arcutis Biotherapeutics and Immunovant

Given the investment horizon of 90 days Arcutis Biotherapeutics is expected to generate 1.24 times more return on investment than Immunovant. However, Arcutis Biotherapeutics is 1.24 times more volatile than Immunovant. It trades about 0.07 of its potential returns per unit of risk. Immunovant is currently generating about -0.02 per unit of risk. If you would invest  1,050  in Arcutis Biotherapeutics on August 31, 2024 and sell it today you would earn a total of  121.00  from holding Arcutis Biotherapeutics or generate 11.52% return on investment over 90 days.

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

Arcutis Biotherapeutics  vs.  Immunovant

Arcutis Biotherapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Arcutis Biotherapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Arcutis Biotherapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Immunovant

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Immunovant has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Immunovant is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Arcutis Biotherapeutics and Immunovant

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

The idea behind Arcutis Biotherapeutics and Immunovant 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.