Correlation Between Avenue Therapeutics and Awakn Life

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

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

Diversification Opportunities for Avenue Therapeutics and Awakn Life

0.42

Correlation Coefficient

Avenue Therapeutics  Awakn Life

Very weak diversification

The 3 months correlation between Avenue and Awakn is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Avenue Therapeutics and Awakn Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Awakn Life Sciences and Avenue 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 Avenue Therapeutics are associated (or correlated) with Awakn Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Awakn Life Sciences has no effect on the direction of Avenue Therapeutics i.e., Avenue Therapeutics and Awakn Life go up and down completely randomly.

Pair Corralation between Avenue Therapeutics and Awakn Life

Given the investment horizon of 90 days Avenue Therapeutics is expected to under-perform the Awakn Life. But the stock apears to be less risky and, when comparing its historical volatility, Avenue Therapeutics is 1.61 times less risky than Awakn Life. The stock trades about -0.1 of its potential returns per unit of risk. The Awakn Life Sciences is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Awakn Life Sciences on December 5, 2024 and sell it today you would lose (12.50) from holding Awakn Life Sciences or give up 65.79% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.98%
Values	Daily Returns

Avenue Therapeutics  vs.  Awakn Life Sciences

Avenue Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Avenue Therapeutics 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 fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Awakn Life Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Awakn Life Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Avenue Therapeutics and Awakn Life

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

The idea behind Avenue Therapeutics and Awakn 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.