Correlation Between Replimune and Avidity Biosciences

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

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

Diversification Opportunities for Replimune and Avidity Biosciences

0.31

Correlation Coefficient

Replimune  Avidity Biosciences

Weak diversification

The 3 months correlation between Replimune and Avidity is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Replimune Group and Avidity Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avidity Biosciences and Replimune 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 Replimune Group are associated (or correlated) with Avidity Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avidity Biosciences has no effect on the direction of Replimune i.e., Replimune and Avidity Biosciences go up and down completely randomly.

Pair Corralation between Replimune and Avidity Biosciences

Given the investment horizon of 90 days Replimune Group is expected to generate 1.37 times more return on investment than Avidity Biosciences. However, Replimune is 1.37 times more volatile than Avidity Biosciences. It trades about 0.11 of its potential returns per unit of risk. Avidity Biosciences is currently generating about 0.04 per unit of risk. If you would invest  1,028  in Replimune Group on August 31, 2024 and sell it today you would earn a total of  380.00  from holding Replimune Group or generate 36.96% return on investment over 90 days.

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

Replimune Group  vs.  Avidity Biosciences

Replimune Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Replimune Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Replimune disclosed solid returns over the last few months and may actually be approaching a breakup point.

Avidity Biosciences

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avidity Biosciences are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Avidity Biosciences may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Replimune and Avidity Biosciences

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

The idea behind Replimune Group and Avidity Biosciences 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.