Correlation Between Incyte and Aadi Bioscience

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

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

Diversification Opportunities for Incyte and Aadi Bioscience

-0.31

Correlation Coefficient

Incyte  Aadi Bioscience

Very good diversification

The 3 months correlation between Incyte and Aadi is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Incyte and Aadi Bioscience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aadi Bioscience and Incyte 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 Incyte are associated (or correlated) with Aadi Bioscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aadi Bioscience has no effect on the direction of Incyte i.e., Incyte and Aadi Bioscience go up and down completely randomly.

Pair Corralation between Incyte and Aadi Bioscience

Given the investment horizon of 90 days Incyte is expected to generate 0.27 times more return on investment than Aadi Bioscience. However, Incyte is 3.67 times less risky than Aadi Bioscience. It trades about -0.57 of its potential returns per unit of risk. Aadi Bioscience is currently generating about -0.3 per unit of risk. If you would invest  5,824  in Incyte on January 20, 2024 and sell it today you would lose (542.00) from holding Incyte or give up 9.31% of portfolio value over 90 days.

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

Incyte  vs.  Aadi Bioscience

Incyte

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Incyte 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 fundamental indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Aadi Bioscience

Risk-Adjusted Performance

3 of 100

Insignificant

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

Pair Trading with Incyte and Aadi Bioscience

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

The idea behind Incyte and Aadi Bioscience 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.