Correlation Between Annexon and Relay Therapeutics

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

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

Diversification Opportunities for Annexon and Relay Therapeutics

0.73

Correlation Coefficient

Annexon  Relay Therapeutics

Poor diversification

The 3 months correlation between Annexon and Relay is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Annexon and Relay Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Relay Therapeutics 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 Relay Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Relay Therapeutics has no effect on the direction of Annexon i.e., Annexon and Relay Therapeutics go up and down completely randomly.

Pair Corralation between Annexon and Relay Therapeutics

Given the investment horizon of 90 days Annexon is expected to under-perform the Relay Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Annexon is 1.04 times less risky than Relay Therapeutics. The stock trades about -0.25 of its potential returns per unit of risk. The Relay Therapeutics is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  418.00  in Relay Therapeutics on December 28, 2024 and sell it today you would lose (146.00) from holding Relay Therapeutics or give up 34.93% of portfolio value over 90 days.

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

Annexon  vs.  Relay Therapeutics

Annexon

Risk-Adjusted Performance

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 weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Relay Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Relay Therapeutics 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Annexon and Relay Therapeutics

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

The idea behind Annexon and Relay 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.