Correlation Between Avidity Biosciences and Replimune

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

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

Diversification Opportunities for Avidity Biosciences and Replimune

0.31

Correlation Coefficient

Avidity Biosciences  Replimune

Weak diversification

The 3 months correlation between Avidity and Replimune is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Avidity Biosciences and Replimune Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Replimune Group and Avidity 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 Avidity Biosciences are associated (or correlated) with Replimune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Replimune Group has no effect on the direction of Avidity Biosciences i.e., Avidity Biosciences and Replimune go up and down completely randomly.

Pair Corralation between Avidity Biosciences and Replimune

Considering the 90-day investment horizon Avidity Biosciences is expected to generate 165.62 times less return on investment than Replimune. But when comparing it to its historical volatility, Avidity Biosciences is 1.64 times less risky than Replimune. It trades about 0.0 of its potential returns per unit of risk. Replimune Group is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  1,228  in Replimune Group on August 30, 2024 and sell it today you would earn a total of  177.00  from holding Replimune Group or generate 14.41% return on investment over 90 days.

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

Avidity Biosciences  vs.  Replimune Group

Avidity Biosciences

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Avidity Biosciences are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Avidity Biosciences is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Replimune Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Replimune Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Replimune disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avidity Biosciences and Replimune

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

The idea behind Avidity Biosciences and Replimune Group 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.

Check out your portfolio center.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.