Correlation Between Avantor and AnaptysBio

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

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

Diversification Opportunities for Avantor and AnaptysBio

0.71

Correlation Coefficient

Avantor  AnaptysBio

Poor diversification

The 3 months correlation between Avantor and AnaptysBio is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Avantor and AnaptysBio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AnaptysBio and Avantor 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 Avantor are associated (or correlated) with AnaptysBio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AnaptysBio has no effect on the direction of Avantor i.e., Avantor and AnaptysBio go up and down completely randomly.

Pair Corralation between Avantor and AnaptysBio

Given the investment horizon of 90 days Avantor is expected to generate 1.75 times less return on investment than AnaptysBio. But when comparing it to its historical volatility, Avantor is 1.63 times less risky than AnaptysBio. It trades about 0.04 of its potential returns per unit of risk. AnaptysBio is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  2,697  in AnaptysBio on June 25, 2024 and sell it today you would earn a total of  1,151  from holding AnaptysBio or generate 42.68% return on investment over 90 days.

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

Avantor  vs.  AnaptysBio

Avantor

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avantor are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Avantor reported solid returns over the last few months and may actually be approaching a breakup point.

AnaptysBio

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in AnaptysBio are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, AnaptysBio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Avantor and AnaptysBio

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

The idea behind Avantor and AnaptysBio 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.