Correlation Between Connect Biopharma and Avenue Therapeutics

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

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

Diversification Opportunities for Connect Biopharma and Avenue Therapeutics

0.4

Correlation Coefficient

Connect Biopharma  Avenue Therapeutics

Very weak diversification

The 3 months correlation between Connect and Avenue is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Connect Biopharma Holdings and Avenue Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avenue Therapeutics and Connect Biopharma 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 Connect Biopharma Holdings are associated (or correlated) with Avenue Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avenue Therapeutics has no effect on the direction of Connect Biopharma i.e., Connect Biopharma and Avenue Therapeutics go up and down completely randomly.

Pair Corralation between Connect Biopharma and Avenue Therapeutics

Given the investment horizon of 90 days Connect Biopharma Holdings is expected to generate 0.92 times more return on investment than Avenue Therapeutics. However, Connect Biopharma Holdings is 1.08 times less risky than Avenue Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Avenue Therapeutics is currently generating about -0.06 per unit of risk. If you would invest  87.00  in Connect Biopharma Holdings on September 5, 2024 and sell it today you would earn a total of  24.00  from holding Connect Biopharma Holdings or generate 27.59% return on investment over 90 days.

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

Connect Biopharma Holdings  vs.  Avenue Therapeutics

Connect Biopharma

Risk-Adjusted Performance

0 of 100

Very Weak

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

Avenue Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avenue Therapeutics 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 fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Connect Biopharma and Avenue Therapeutics

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

The idea behind Connect Biopharma Holdings and Avenue 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 Anywhere module to track or share privately all of your investments from the convenience of any device.