Correlation Between Instil Bio and Spero Therapeutics

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

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

Diversification Opportunities for Instil Bio and Spero Therapeutics

0.14

Correlation Coefficient

Instil Bio  Spero Therapeutics

Average diversification

The 3 months correlation between Instil and Spero is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Instil Bio and Spero Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Spero Therapeutics and Instil 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 Instil Bio are associated (or correlated) with Spero Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Spero Therapeutics has no effect on the direction of Instil Bio i.e., Instil Bio and Spero Therapeutics go up and down completely randomly.

Pair Corralation between Instil Bio and Spero Therapeutics

Considering the 90-day investment horizon Instil Bio is expected to under-perform the Spero Therapeutics. In addition to that, Instil Bio is 2.13 times more volatile than Spero Therapeutics. It trades about -0.18 of its total potential returns per unit of risk. Spero Therapeutics is currently generating about -0.17 per unit of volatility. If you would invest  129.00  in Spero Therapeutics on August 29, 2024 and sell it today you would lose (16.00) from holding Spero Therapeutics or give up 12.4% of portfolio value over 90 days.

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

Instil Bio  vs.  Spero Therapeutics

Instil Bio

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Instil Bio are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite weak forward indicators, Instil Bio disclosed solid returns over the last few months and may actually be approaching a breakup point.

Spero Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Instil Bio and Spero Therapeutics

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

The idea behind Instil Bio and Spero 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.