Correlation Between Annexon and Heron Therapeuti

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

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

Diversification Opportunities for Annexon and Heron Therapeuti

0.57

Correlation Coefficient

Annexon  Heron Therapeuti

Very weak diversification

The 3 months correlation between Annexon and Heron is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Annexon and Heron Therapeuti in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heron Therapeuti and Annexon 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 Annexon are associated (or correlated) with Heron Therapeuti. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heron Therapeuti has no effect on the direction of Annexon i.e., Annexon and Heron Therapeuti go up and down completely randomly.

Pair Corralation between Annexon and Heron Therapeuti

Given the investment horizon of 90 days Annexon is expected to generate 0.72 times more return on investment than Heron Therapeuti. However, Annexon is 1.38 times less risky than Heron Therapeuti. It trades about -0.05 of its potential returns per unit of risk. Heron Therapeuti is currently generating about -0.1 per unit of risk. If you would invest  582.00  in Annexon on September 5, 2024 and sell it today you would lose (83.00) from holding Annexon or give up 14.26% of portfolio value over 90 days.

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

Annexon  vs.  Heron Therapeuti

Annexon

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Annexon has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Heron Therapeuti

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heron Therapeuti 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 Stock's basic indicators remain fairly 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.

Pair Trading with Annexon and Heron Therapeuti

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

The idea behind Annexon and Heron Therapeuti 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.