Correlation Between Willow Biosciences and Avicanna

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

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

Diversification Opportunities for Willow Biosciences and Avicanna

0.14

Correlation Coefficient

Willow Biosciences  Avicanna

Average diversification

The 3 months correlation between Willow and Avicanna is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Willow Biosciences and Avicanna in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avicanna and Willow Biosciences 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 Willow Biosciences are associated (or correlated) with Avicanna. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avicanna has no effect on the direction of Willow Biosciences i.e., Willow Biosciences and Avicanna go up and down completely randomly.

Pair Corralation between Willow Biosciences and Avicanna

Assuming the 90 days horizon Willow Biosciences is expected to under-perform the Avicanna. In addition to that, Willow Biosciences is 1.93 times more volatile than Avicanna. It trades about -0.09 of its total potential returns per unit of risk. Avicanna is currently generating about 0.05 per unit of volatility. If you would invest  20.00  in Avicanna on December 29, 2024 and sell it today you would earn a total of  1.00  from holding Avicanna or generate 5.0% return on investment over 90 days.

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

Willow Biosciences  vs.  Avicanna

Willow Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Willow Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Avicanna

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Avicanna are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Avicanna reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Willow Biosciences and Avicanna

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

The idea behind Willow Biosciences and Avicanna 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.