Correlation Between Stoke Therapeutics and IGM Biosciences

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

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

Diversification Opportunities for Stoke Therapeutics and IGM Biosciences

-0.12

Correlation Coefficient

Stoke Therapeutics  IGM Biosciences

Good diversification

The 3 months correlation between Stoke and IGM is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Stoke Therapeutics and IGM Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IGM Biosciences and Stoke Therapeutics 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 Stoke Therapeutics are associated (or correlated) with IGM Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IGM Biosciences has no effect on the direction of Stoke Therapeutics i.e., Stoke Therapeutics and IGM Biosciences go up and down completely randomly.

Pair Corralation between Stoke Therapeutics and IGM Biosciences

Given the investment horizon of 90 days Stoke Therapeutics is expected to under-perform the IGM Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, Stoke Therapeutics is 2.04 times less risky than IGM Biosciences. The stock trades about -0.07 of its potential returns per unit of risk. The IGM Biosciences is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,019  in IGM Biosciences on August 30, 2024 and sell it today you would earn a total of  24.00  from holding IGM Biosciences or generate 2.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Stoke Therapeutics  vs.  IGM Biosciences

Stoke Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Stoke Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in December 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

IGM Biosciences

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in IGM Biosciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, IGM Biosciences unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Stoke Therapeutics and IGM Biosciences

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

The idea behind Stoke Therapeutics and IGM Biosciences 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .