Correlation Between Instil Bio and Terns Pharmaceuticals

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

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

Diversification Opportunities for Instil Bio and Terns Pharmaceuticals

-0.35

Correlation Coefficient

Instil Bio  Terns Pharmaceuticals

Very good diversification

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

Pair Corralation between Instil Bio and Terns Pharmaceuticals

Considering the 90-day investment horizon Instil Bio is expected to under-perform the Terns Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Instil Bio is 1.78 times less risky than Terns Pharmaceuticals. The stock trades about -0.15 of its potential returns per unit of risk. The Terns Pharmaceuticals is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  715.00  in Terns Pharmaceuticals on April 8, 2024 and sell it today you would lose (34.00) from holding Terns Pharmaceuticals or give up 4.76% of portfolio value over 90 days.

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

Instil Bio  vs.  Terns Pharmaceuticals

Instil Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Instil Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's forward indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Terns Pharmaceuticals

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Terns Pharmaceuticals are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Terns Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Instil Bio and Terns Pharmaceuticals

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

The idea behind Instil Bio and Terns 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.

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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..