Correlation Between Lexicon Pharmaceuticals and Anavex Life

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

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

Diversification Opportunities for Lexicon Pharmaceuticals and Anavex Life

-0.84

Correlation Coefficient

Lexicon Pharmaceuticals  Anavex Life

Pay attention - limited upside

The 3 months correlation between Lexicon and Anavex is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding Lexicon Pharmaceuticals 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 Lexicon Pharmaceuticals 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 Lexicon Pharmaceuticals 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 Lexicon Pharmaceuticals i.e., Lexicon Pharmaceuticals and Anavex Life go up and down completely randomly.

Pair Corralation between Lexicon Pharmaceuticals and Anavex Life

Given the investment horizon of 90 days Lexicon Pharmaceuticals is expected to generate 2.08 times less return on investment than Anavex Life. But when comparing it to its historical volatility, Lexicon Pharmaceuticals is 1.19 times less risky than Anavex Life. It trades about 0.11 of its potential returns per unit of risk. Anavex Life Sciences is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  906.00  in Anavex Life Sciences on October 5, 2024 and sell it today you would earn a total of  309.00  from holding Anavex Life Sciences or generate 34.11% return on investment over 90 days.

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

Lexicon Pharmaceuticals  vs.  Anavex Life Sciences

Lexicon Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lexicon Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Anavex Life Sciences

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Anavex Life Sciences are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Anavex Life disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lexicon Pharmaceuticals and Anavex Life

The main advantage of trading using opposite Lexicon Pharmaceuticals and Anavex Life positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lexicon Pharmaceuticals 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 Lexicon Pharmaceuticals 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.