Correlation Between INC Research and Tempest Therapeutics

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

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

Diversification Opportunities for INC Research and Tempest Therapeutics

-0.35

Correlation Coefficient

INC Research  Tempest Therapeutics

Very good diversification

The 3 months correlation between INC and Tempest is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding INC Research Holdings and Tempest Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tempest Therapeutics and INC Research 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 INC Research Holdings are associated (or correlated) with Tempest Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tempest Therapeutics has no effect on the direction of INC Research i.e., INC Research and Tempest Therapeutics go up and down completely randomly.

Pair Corralation between INC Research and Tempest Therapeutics

Given the investment horizon of 90 days INC Research Holdings is expected to under-perform the Tempest Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, INC Research Holdings is 2.46 times less risky than Tempest Therapeutics. The stock trades about -0.02 of its potential returns per unit of risk. The Tempest Therapeutics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  685.00  in Tempest Therapeutics on May 1, 2025 and sell it today you would earn a total of  96.00  from holding Tempest Therapeutics or generate 14.01% return on investment over 90 days.

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

INC Research Holdings  vs.  Tempest Therapeutics

INC Research Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days INC Research Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, INC Research is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Tempest Therapeutics

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Tempest Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, Tempest Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with INC Research and Tempest Therapeutics

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

The idea behind INC Research Holdings and Tempest Therapeutics 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.