Correlation Between AnaptysBio and Edgewise Therapeutics

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

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

Diversification Opportunities for AnaptysBio and Edgewise Therapeutics

-0.64

Correlation Coefficient

AnaptysBio  Edgewise Therapeutics

Excellent diversification

The 3 months correlation between AnaptysBio and Edgewise is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding AnaptysBio and Edgewise Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewise 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 Edgewise Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewise Therapeutics has no effect on the direction of AnaptysBio i.e., AnaptysBio and Edgewise Therapeutics go up and down completely randomly.

Pair Corralation between AnaptysBio and Edgewise Therapeutics

Given the investment horizon of 90 days AnaptysBio is expected to under-perform the Edgewise Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, AnaptysBio is 1.43 times less risky than Edgewise Therapeutics. The stock trades about -0.08 of its potential returns per unit of risk. The Edgewise Therapeutics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  1,788  in Edgewise Therapeutics on August 31, 2024 and sell it today you would earn a total of  1,432  from holding Edgewise Therapeutics or generate 80.09% return on investment over 90 days.

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

AnaptysBio  vs.  Edgewise 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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Edgewise Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Edgewise Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Edgewise Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AnaptysBio and Edgewise Therapeutics

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

The idea behind AnaptysBio and Edgewise 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.