Correlation Between Connect Biopharma and INC Research

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

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

Diversification Opportunities for Connect Biopharma and INC Research

0.69

Correlation Coefficient

Connect Biopharma  INC Research

Poor diversification

The 3 months correlation between Connect and INC is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings and INC Research Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on INC Research Holdings and Connect Biopharma 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 Connect Biopharma Holdings are associated (or correlated) with INC Research. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of INC Research Holdings has no effect on the direction of Connect Biopharma i.e., Connect Biopharma and INC Research go up and down completely randomly.

Pair Corralation between Connect Biopharma and INC Research

Given the investment horizon of 90 days Connect Biopharma Holdings is expected to generate 1.1 times more return on investment than INC Research. However, Connect Biopharma is 1.1 times more volatile than INC Research Holdings. It trades about -0.04 of its potential returns per unit of risk. INC Research Holdings is currently generating about -0.14 per unit of risk. If you would invest  129.00  in Connect Biopharma Holdings on September 3, 2024 and sell it today you would lose (23.00) from holding Connect Biopharma Holdings or give up 17.83% of portfolio value over 90 days.

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

Connect Biopharma Holdings  vs.  INC Research Holdings

Connect Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Connect Biopharma Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

INC Research Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Connect Biopharma and INC Research

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

The idea behind Connect Biopharma Holdings and INC Research Holdings 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.