Correlation Between Kronos Bio and Gossamer Bio

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

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

Diversification Opportunities for Kronos Bio and Gossamer Bio

0.63

Correlation Coefficient

Kronos Bio  Gossamer Bio

Poor diversification

The 3 months correlation between Kronos and Gossamer is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Kronos Bio and Gossamer Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Gossamer Bio and Kronos Bio 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 Kronos Bio are associated (or correlated) with Gossamer Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gossamer Bio has no effect on the direction of Kronos Bio i.e., Kronos Bio and Gossamer Bio go up and down completely randomly.

Pair Corralation between Kronos Bio and Gossamer Bio

Given the investment horizon of 90 days Kronos Bio is expected to generate 1.03 times more return on investment than Gossamer Bio. However, Kronos Bio is 1.03 times more volatile than Gossamer Bio. It trades about -0.01 of its potential returns per unit of risk. Gossamer Bio is currently generating about -0.08 per unit of risk. If you would invest  100.00  in Kronos Bio on September 3, 2024 and sell it today you would lose (5.00) from holding Kronos Bio or give up 5.0% of portfolio value over 90 days.

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

Kronos Bio  vs.  Gossamer Bio

Kronos Bio

Risk-Adjusted Performance

0 of 100

Very Weak

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

Gossamer Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gossamer Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in January 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Kronos Bio and Gossamer Bio

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

The idea behind Kronos Bio and Gossamer Bio 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.