Correlation Between IO Biotech and Structure Therapeutics

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

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

Diversification Opportunities for IO Biotech and Structure Therapeutics

0.41

Correlation Coefficient

IO Biotech  Structure Therapeutics

Very weak diversification

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

Pair Corralation between IO Biotech and Structure Therapeutics

Given the investment horizon of 90 days IO Biotech is expected to generate 2.08 times more return on investment than Structure Therapeutics. However, IO Biotech is 2.08 times more volatile than Structure Therapeutics American. It trades about 0.02 of its potential returns per unit of risk. Structure Therapeutics American is currently generating about -0.03 per unit of risk. If you would invest  100.00  in IO Biotech on September 3, 2024 and sell it today you would lose (10.00) from holding IO Biotech or give up 10.0% of portfolio value over 90 days.

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

IO Biotech  vs.  Structure Therapeutics America

IO Biotech

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in IO Biotech are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, IO Biotech may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Structure Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Structure Therapeutics American has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest unsteady performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with IO Biotech and Structure Therapeutics

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

The idea behind IO Biotech and Structure Therapeutics American 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.