Correlation Between Mustang Bio and Akero Therapeutics

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

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

Diversification Opportunities for Mustang Bio and Akero Therapeutics

-0.63

Correlation Coefficient

Mustang Bio  Akero Therapeutics

Excellent diversification

The 3 months correlation between Mustang and Akero is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding Mustang Bio and Akero Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Akero Therapeutics and Mustang Bio 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 Mustang Bio are associated (or correlated) with Akero Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Akero Therapeutics has no effect on the direction of Mustang Bio i.e., Mustang Bio and Akero Therapeutics go up and down completely randomly.

Pair Corralation between Mustang Bio and Akero Therapeutics

Given the investment horizon of 90 days Mustang Bio is expected to generate 7.21 times less return on investment than Akero Therapeutics. In addition to that, Mustang Bio is 1.44 times more volatile than Akero Therapeutics. It trades about 0.02 of its total potential returns per unit of risk. Akero Therapeutics is currently generating about 0.19 per unit of volatility. If you would invest  2,808  in Akero Therapeutics on July 22, 2024 and sell it today you would earn a total of  315.00  from holding Akero Therapeutics or generate 11.22% return on investment over 90 days.

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

Mustang Bio  vs.  Akero Therapeutics

Mustang Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mustang Bio has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in November 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

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.

Pair Trading with Mustang Bio and Akero Therapeutics

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

The idea behind Mustang Bio and Akero 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.

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.