Correlation Between Annexon and Soleno Therapeutics

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

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

Diversification Opportunities for Annexon and Soleno Therapeutics

0.65

Correlation Coefficient

Annexon  Soleno Therapeutics

Poor diversification

The 3 months correlation between Annexon and Soleno is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Annexon and Soleno Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soleno 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 Soleno Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soleno Therapeutics has no effect on the direction of Annexon i.e., Annexon and Soleno Therapeutics go up and down completely randomly.

Pair Corralation between Annexon and Soleno Therapeutics

Given the investment horizon of 90 days Annexon is expected to generate 1.59 times more return on investment than Soleno Therapeutics. However, Annexon is 1.59 times more volatile than Soleno Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Soleno Therapeutics is currently generating about 0.05 per unit of risk. If you would invest  235.00  in Annexon on October 5, 2024 and sell it today you would earn a total of  315.00  from holding Annexon or generate 134.04% return on investment over 90 days.

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

Annexon  vs.  Soleno Therapeutics

Annexon

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Soleno Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Soleno Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Soleno Therapeutics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Annexon and Soleno Therapeutics

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

The idea behind Annexon and Soleno 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.

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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..