Correlation Between Akero Therapeutics and BeiGene

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

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

Diversification Opportunities for Akero Therapeutics and BeiGene

0.53

Correlation Coefficient

Akero Therapeutics  BeiGene

Very weak diversification

The 3 months correlation between Akero and BeiGene is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Akero Therapeutics and BeiGene in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BeiGene and Akero 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 Akero Therapeutics are associated (or correlated) with BeiGene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BeiGene has no effect on the direction of Akero Therapeutics i.e., Akero Therapeutics and BeiGene go up and down completely randomly.

Pair Corralation between Akero Therapeutics and BeiGene

Given the investment horizon of 90 days Akero Therapeutics is expected to generate 2.09 times less return on investment than BeiGene. In addition to that, Akero Therapeutics is 1.14 times more volatile than BeiGene. It trades about 0.08 of its total potential returns per unit of risk. BeiGene is currently generating about 0.2 per unit of volatility. If you would invest  16,093  in BeiGene on July 22, 2024 and sell it today you would earn a total of  5,804  from holding BeiGene or generate 36.07% return on investment over 90 days.

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

Akero Therapeutics  vs.  BeiGene

Akero Therapeutics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Akero Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Akero Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

BeiGene

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BeiGene are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, BeiGene exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Akero Therapeutics and BeiGene

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

The idea behind Akero Therapeutics and BeiGene 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.