Correlation Between Opthea and Kronos BioInc

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

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

Diversification Opportunities for Opthea and Kronos BioInc

0.49

Correlation Coefficient

Opthea  Kronos BioInc

Very weak diversification

The 3 months correlation between Opthea and Kronos is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Opthea and Kronos BioInc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos BioInc and Opthea 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 Opthea are associated (or correlated) with Kronos BioInc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos BioInc has no effect on the direction of Opthea i.e., Opthea and Kronos BioInc go up and down completely randomly.

Pair Corralation between Opthea and Kronos BioInc

Considering the 90-day investment horizon Opthea is expected to generate 1.54 times more return on investment than Kronos BioInc. However, Opthea is 1.54 times more volatile than Kronos BioInc. It trades about -0.14 of its potential returns per unit of risk. Kronos BioInc is currently generating about -0.29 per unit of risk. If you would invest  390.00  in Opthea on February 4, 2024 and sell it today you would lose (48.20) from holding Opthea or give up 12.36% of portfolio value over 90 days.

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

Opthea  vs.  Kronos BioInc

Opthea

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Opthea are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Opthea unveiled solid returns over the last few months and may actually be approaching a breakup point.

Kronos BioInc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kronos BioInc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Kronos BioInc is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Opthea and Kronos BioInc

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

The idea behind Opthea and Kronos BioInc 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.