Correlation Between Cognition Therapeutics and Anavex Life

Can any of the company-specific risk be diversified away by investing in both Cognition 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 Cognition 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 Cognition Therapeutics and Anavex Life Sciences, you can compare the effects of market volatilities on Cognition 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 Cognition Therapeutics with a short position of Anavex Life. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cognition Therapeutics and Anavex Life.

Diversification Opportunities for Cognition Therapeutics and Anavex Life

0.57

Correlation Coefficient

Cognition Therapeutics  Anavex Life

Very weak diversification

The 3 months correlation between Cognition and Anavex is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Cognition 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 Cognition 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 Cognition 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 Cognition Therapeutics i.e., Cognition Therapeutics and Anavex Life go up and down completely randomly.

Pair Corralation between Cognition Therapeutics and Anavex Life

Given the investment horizon of 90 days Cognition Therapeutics is expected to under-perform the Anavex Life. But the stock apears to be less risky and, when comparing its historical volatility, Cognition Therapeutics is 1.01 times less risky than Anavex Life. The stock trades about -0.19 of its potential returns per unit of risk. The Anavex Life Sciences is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,104  in Anavex Life Sciences on December 29, 2024 and sell it today you would lose (232.00) from holding Anavex Life Sciences or give up 21.01% of portfolio value over 90 days.

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

Cognition Therapeutics  vs.  Anavex Life Sciences

Cognition Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cognition Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal 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 current disturbance may also be a sign of long term up-swing for the company investors.

Anavex Life Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Anavex Life Sciences 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 quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Cognition Therapeutics and Anavex Life

The main advantage of trading using opposite Cognition Therapeutics and Anavex Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cognition 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 Cognition 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.