Correlation Between Caribou Biosciences and Akero Therapeutics

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

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

Diversification Opportunities for Caribou Biosciences and Akero Therapeutics

0.84

Correlation Coefficient

Caribou Biosciences  Akero Therapeutics

Very poor diversification

The 3 months correlation between Caribou and Akero is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Caribou Biosciences and Akero Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akero Therapeutics and Caribou Biosciences 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 Caribou Biosciences are associated (or correlated) with Akero Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akero Therapeutics has no effect on the direction of Caribou Biosciences i.e., Caribou Biosciences and Akero Therapeutics go up and down completely randomly.

Pair Corralation between Caribou Biosciences and Akero Therapeutics

Given the investment horizon of 90 days Caribou Biosciences is expected to under-perform the Akero Therapeutics. In addition to that, Caribou Biosciences is 1.02 times more volatile than Akero Therapeutics. It trades about -0.03 of its total potential returns per unit of risk. Akero Therapeutics is currently generating about 0.01 per unit of volatility. If you would invest  4,578  in Akero Therapeutics on September 26, 2024 and sell it today you would lose (1,722) from holding Akero Therapeutics or give up 37.61% of portfolio value over 90 days.

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

Caribou Biosciences  vs.  Akero Therapeutics

Caribou Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

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

Akero Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Caribou Biosciences and Akero Therapeutics

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

The idea behind Caribou Biosciences and Akero Therapeutics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.