Correlation Between Gracell Biotechnologies and AN2 Therapeutics

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

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

Diversification Opportunities for Gracell Biotechnologies and AN2 Therapeutics

0.85

Correlation Coefficient

Gracell Biotechnologies  AN2 Therapeutics

Very poor diversification

The 3 months correlation between Gracell and AN2 is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Gracell Biotechnologies and AN2 Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AN2 Therapeutics and Gracell Biotechnologies 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 Gracell Biotechnologies 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 Gracell Biotechnologies i.e., Gracell Biotechnologies and AN2 Therapeutics go up and down completely randomly.

Pair Corralation between Gracell Biotechnologies and AN2 Therapeutics

Given the investment horizon of 90 days Gracell Biotechnologies is expected to generate 0.97 times more return on investment than AN2 Therapeutics. However, Gracell Biotechnologies is 1.04 times less risky than AN2 Therapeutics. It trades about 0.11 of its potential returns per unit of risk. AN2 Therapeutics is currently generating about -0.01 per unit of risk. If you would invest  215.00  in Gracell Biotechnologies on October 10, 2024 and sell it today you would earn a total of  187.00  from holding Gracell Biotechnologies or generate 86.98% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	26.01%
Values	Daily Returns

Gracell Biotechnologies  vs.  AN2 Therapeutics

Gracell Biotechnologies

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Gracell Biotechnologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental indicators, Gracell Biotechnologies is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

AN2 Therapeutics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AN2 Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, AN2 Therapeutics showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Gracell Biotechnologies and AN2 Therapeutics

The main advantage of trading using opposite Gracell Biotechnologies and AN2 Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Gracell Biotechnologies 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 Gracell Biotechnologies 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.