Correlation Between Inozyme PharmaInc and Amylyx Pharmaceuticals

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

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

Diversification Opportunities for Inozyme PharmaInc and Amylyx Pharmaceuticals

0.26

Correlation Coefficient

Inozyme PharmaInc  Amylyx Pharmaceuticals

Modest diversification

The 3 months correlation between Inozyme and Amylyx is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Inozyme PharmaInc and Amylyx Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amylyx Pharmaceuticals and Inozyme PharmaInc 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 Inozyme PharmaInc are associated (or correlated) with Amylyx Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amylyx Pharmaceuticals has no effect on the direction of Inozyme PharmaInc i.e., Inozyme PharmaInc and Amylyx Pharmaceuticals go up and down completely randomly.

Pair Corralation between Inozyme PharmaInc and Amylyx Pharmaceuticals

Given the investment horizon of 90 days Inozyme PharmaInc is expected to under-perform the Amylyx Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Inozyme PharmaInc is 1.33 times less risky than Amylyx Pharmaceuticals. The stock trades about -0.39 of its potential returns per unit of risk. The Amylyx Pharmaceuticals is currently generating about -0.23 of returns per unit of risk over similar time horizon. If you would invest  262.00  in Amylyx Pharmaceuticals on February 5, 2024 and sell it today you would lose (59.00) from holding Amylyx Pharmaceuticals or give up 22.52% of portfolio value over 90 days.

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

Inozyme PharmaInc  vs.  Amylyx Pharmaceuticals

Inozyme PharmaInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inozyme PharmaInc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Inozyme PharmaInc is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Amylyx Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Amylyx Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Etf's essential indicators remain fairly strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the ETF investors.

Pair Trading with Inozyme PharmaInc and Amylyx Pharmaceuticals

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

The idea behind Inozyme PharmaInc and Amylyx Pharmaceuticals 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.