Correlation Between Axsome Therapeutics and Iovance Biotherapeutics

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

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

Diversification Opportunities for Axsome Therapeutics and Iovance Biotherapeutics

-0.17

Correlation Coefficient

Axsome Therapeutics  Iovance Biotherapeutics

Good diversification

The 3 months correlation between Axsome and Iovance is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Axsome Therapeutics and Iovance Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Iovance Biotherapeutics 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 Iovance Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Iovance Biotherapeutics has no effect on the direction of Axsome Therapeutics i.e., Axsome Therapeutics and Iovance Biotherapeutics go up and down completely randomly.

Pair Corralation between Axsome Therapeutics and Iovance Biotherapeutics

Given the investment horizon of 90 days Axsome Therapeutics is expected to under-perform the Iovance Biotherapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Axsome Therapeutics is 1.68 times less risky than Iovance Biotherapeutics. The stock trades about -0.38 of its potential returns per unit of risk. The Iovance Biotherapeutics is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  873.00  in Iovance Biotherapeutics on October 5, 2024 and sell it today you would lose (94.00) from holding Iovance Biotherapeutics or give up 10.77% of portfolio value over 90 days.

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

Axsome Therapeutics  vs.  Iovance Biotherapeutics

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.

Iovance Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Iovance Biotherapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Axsome Therapeutics and Iovance Biotherapeutics

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

The idea behind Axsome Therapeutics and Iovance Biotherapeutics 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.