Correlation Between Bionomics and AN2 Therapeutics

Can any of the company-specific risk be diversified away by investing in both Bionomics and AN2 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 Bionomics and AN2 Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bionomics Ltd ADR and AN2 Therapeutics, you can compare the effects of market volatilities on Bionomics and AN2 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 Bionomics with a short position of AN2 Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bionomics and AN2 Therapeutics.

Diversification Opportunities for Bionomics and AN2 Therapeutics

0.42

Correlation Coefficient

Bionomics  AN2 Therapeutics

Very weak diversification

The 3 months correlation between Bionomics and AN2 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Bionomics Ltd ADR and AN2 Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AN2 Therapeutics and Bionomics 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 Bionomics Ltd ADR are associated (or correlated) with AN2 Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AN2 Therapeutics has no effect on the direction of Bionomics i.e., Bionomics and AN2 Therapeutics go up and down completely randomly.

Pair Corralation between Bionomics and AN2 Therapeutics

Given the investment horizon of 90 days Bionomics Ltd ADR is expected to generate 2.54 times more return on investment than AN2 Therapeutics. However, Bionomics is 2.54 times more volatile than AN2 Therapeutics. It trades about 0.14 of its potential returns per unit of risk. AN2 Therapeutics is currently generating about 0.01 per unit of risk. If you would invest  364.00  in Bionomics Ltd ADR on December 29, 2024 and sell it today you would earn a total of  124.00  from holding Bionomics Ltd ADR or generate 34.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	60.66%
Values	Daily Returns

Bionomics Ltd ADR  vs.  AN2 Therapeutics

Bionomics ADR

Risk-Adjusted Performance

Good

Over the last 90 days Bionomics Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Bionomics showed solid returns over the last few months and may actually be approaching a breakup point.

AN2 Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days AN2 Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AN2 Therapeutics is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bionomics and AN2 Therapeutics

The main advantage of trading using opposite Bionomics and AN2 Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bionomics position performs unexpectedly, AN2 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 AN2 Therapeutics will offset losses from the drop in AN2 Therapeutics' long position.

The idea behind Bionomics Ltd ADR and AN2 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.