Correlation Between Ibio and Precision BioSciences

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

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

Diversification Opportunities for Ibio and Precision BioSciences

0.38

Correlation Coefficient

Ibio  Precision BioSciences

Weak diversification

The 3 months correlation between Ibio and Precision is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Ibio Inc and Precision BioSciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Precision BioSciences and Ibio 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 Ibio Inc are associated (or correlated) with Precision BioSciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Precision BioSciences has no effect on the direction of Ibio i.e., Ibio and Precision BioSciences go up and down completely randomly.

Pair Corralation between Ibio and Precision BioSciences

Given the investment horizon of 90 days Ibio Inc is expected to under-perform the Precision BioSciences. In addition to that, Ibio is 2.35 times more volatile than Precision BioSciences. It trades about -0.02 of its total potential returns per unit of risk. Precision BioSciences is currently generating about -0.03 per unit of volatility. If you would invest  5,040  in Precision BioSciences on January 20, 2024 and sell it today you would lose (3,889) from holding Precision BioSciences or give up 77.16% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.79%
Values	Daily Returns

Ibio Inc  vs.  Precision BioSciences

Ibio Inc

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ibio Inc are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Ibio displayed solid returns over the last few months and may actually be approaching a breakup point.

Precision BioSciences

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Precision BioSciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Precision BioSciences disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ibio and Precision BioSciences

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

The idea behind Ibio Inc and Precision 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 Transaction History module to view history of all your transactions and understand their impact on performance.