Correlation Between Axsome Therapeutics and Anavex Life

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

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

Diversification Opportunities for Axsome Therapeutics and Anavex Life

0.21

Correlation Coefficient

Axsome Therapeutics  Anavex Life

Modest diversification

The 3 months correlation between Axsome and Anavex is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Axsome Therapeutics and Anavex Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anavex Life Sciences and Axsome 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 Axsome Therapeutics are associated (or correlated) with Anavex Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anavex Life Sciences has no effect on the direction of Axsome Therapeutics i.e., Axsome Therapeutics and Anavex Life go up and down completely randomly.

Pair Corralation between Axsome Therapeutics and Anavex Life

Given the investment horizon of 90 days Axsome Therapeutics is expected to generate 42.59 times less return on investment than Anavex Life. But when comparing it to its historical volatility, Axsome Therapeutics is 2.94 times less risky than Anavex Life. It trades about 0.02 of its potential returns per unit of risk. Anavex Life Sciences is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  537.00  in Anavex Life Sciences on October 5, 2024 and sell it today you would earn a total of  678.00  from holding Anavex Life Sciences or generate 126.26% return on investment over 90 days.

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

Axsome Therapeutics  vs.  Anavex Life Sciences

Axsome Therapeutics

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Axsome Therapeutics are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Axsome Therapeutics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Anavex Life Sciences

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anavex Life Sciences are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Anavex Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Axsome Therapeutics and Anavex Life

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

The idea behind Axsome Therapeutics and Anavex 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.