Correlation Between Cassava Sciences and Anavex Life

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

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

Diversification Opportunities for Cassava Sciences and Anavex Life

-0.53

Correlation Coefficient

Cassava Sciences  Anavex Life

Excellent diversification

The 3 months correlation between Cassava and Anavex is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cassava Sciences and Anavex Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anavex Life Sciences and Cassava Sciences 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 Cassava Sciences are associated (or correlated) with Anavex Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anavex Life Sciences has no effect on the direction of Cassava Sciences i.e., Cassava Sciences and Anavex Life go up and down completely randomly.

Pair Corralation between Cassava Sciences and Anavex Life

Given the investment horizon of 90 days Cassava Sciences is expected to under-perform the Anavex Life. In addition to that, Cassava Sciences is 2.44 times more volatile than Anavex Life Sciences. It trades about -0.13 of its total potential returns per unit of risk. Anavex Life Sciences is currently generating about 0.19 per unit of volatility. If you would invest  546.00  in Anavex Life Sciences on September 3, 2024 and sell it today you would earn a total of  386.00  from holding Anavex Life Sciences or generate 70.7% return on investment over 90 days.

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

Cassava Sciences  vs.  Anavex Life Sciences

Cassava Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cassava Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady 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.

Anavex Life Sciences

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Anavex Life Sciences are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Anavex Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cassava Sciences and Anavex Life

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

The idea behind Cassava Sciences and Anavex Life Sciences 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.