Correlation Between AnaptysBio and Avalo Therapeutics

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

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

Diversification Opportunities for AnaptysBio and Avalo Therapeutics

-0.38

Correlation Coefficient

AnaptysBio  Avalo Therapeutics

Very good diversification

The 3 months correlation between AnaptysBio and Avalo is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding AnaptysBio and Avalo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avalo Therapeutics and AnaptysBio 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 AnaptysBio are associated (or correlated) with Avalo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avalo Therapeutics has no effect on the direction of AnaptysBio i.e., AnaptysBio and Avalo Therapeutics go up and down completely randomly.

Pair Corralation between AnaptysBio and Avalo Therapeutics

Given the investment horizon of 90 days AnaptysBio is expected to under-perform the Avalo Therapeutics. In addition to that, AnaptysBio is 1.34 times more volatile than Avalo Therapeutics. It trades about -0.17 of its total potential returns per unit of risk. Avalo Therapeutics is currently generating about 0.05 per unit of volatility. If you would invest  864.00  in Avalo Therapeutics on September 15, 2024 and sell it today you would earn a total of  59.00  from holding Avalo Therapeutics or generate 6.83% return on investment over 90 days.

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

AnaptysBio  vs.  Avalo Therapeutics

AnaptysBio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AnaptysBio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Avalo Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avalo Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Avalo Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AnaptysBio and Avalo Therapeutics

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

The idea behind AnaptysBio and Avalo 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.