Correlation Between Infinity Pharmaceuticals and Brickell Biotech

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

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

Diversification Opportunities for Infinity Pharmaceuticals and Brickell Biotech

0.76

Correlation Coefficient

Infinity Pharmaceuticals  Brickell Biotech

Poor diversification

The 3 months correlation between Infinity and Brickell is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Infinity Pharmaceuticals and Brickell Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brickell Biotech and Infinity Pharmaceuticals 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 Infinity Pharmaceuticals are associated (or correlated) with Brickell Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brickell Biotech has no effect on the direction of Infinity Pharmaceuticals i.e., Infinity Pharmaceuticals and Brickell Biotech go up and down completely randomly.

Pair Corralation between Infinity Pharmaceuticals and Brickell Biotech

Given the investment horizon of 90 days Infinity Pharmaceuticals is expected to under-perform the Brickell Biotech. In addition to that, Infinity Pharmaceuticals is 1.36 times more volatile than Brickell Biotech. It trades about -0.04 of its total potential returns per unit of risk. Brickell Biotech is currently generating about -0.04 per unit of volatility. If you would invest  1,039  in Brickell Biotech on January 26, 2024 and sell it today you would lose (949.00) from holding Brickell Biotech or give up 91.34% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	69.31%
Values	Daily Returns

Infinity Pharmaceuticals  vs.  Brickell Biotech

Infinity Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Infinity Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, Infinity Pharmaceuticals is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Brickell Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Brickell Biotech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Infinity Pharmaceuticals and Brickell Biotech

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

The idea behind Infinity Pharmaceuticals and Brickell Biotech 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 Investment Finder module to use AI to screen and filter profitable investment opportunities.