Correlation Between Anika Therapeutics and STRATA Skin

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

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

Diversification Opportunities for Anika Therapeutics and STRATA Skin

-0.4

Correlation Coefficient

Anika Therapeutics  STRATA Skin

Very good diversification

The 3 months correlation between Anika and STRATA is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Anika Therapeutics and STRATA Skin Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on STRATA Skin Sciences and Anika Therapeutics 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 Anika Therapeutics are associated (or correlated) with STRATA Skin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of STRATA Skin Sciences has no effect on the direction of Anika Therapeutics i.e., Anika Therapeutics and STRATA Skin go up and down completely randomly.

Pair Corralation between Anika Therapeutics and STRATA Skin

Given the investment horizon of 90 days Anika Therapeutics is expected to under-perform the STRATA Skin. But the stock apears to be less risky and, when comparing its historical volatility, Anika Therapeutics is 1.26 times less risky than STRATA Skin. The stock trades about -0.14 of its potential returns per unit of risk. The STRATA Skin Sciences is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  294.00  in STRATA Skin Sciences on September 26, 2024 and sell it today you would lose (6.00) from holding STRATA Skin Sciences or give up 2.04% of portfolio value over 90 days.

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

Anika Therapeutics  vs.  STRATA Skin Sciences

Anika Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Anika Therapeutics 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 forward indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

STRATA Skin Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days STRATA Skin Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's forward-looking signals remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Anika Therapeutics and STRATA Skin

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

The idea behind Anika Therapeutics and STRATA Skin 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.