Correlation Between Avidity Biosciences and SpringWorks Therapeutics

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

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

Diversification Opportunities for Avidity Biosciences and SpringWorks Therapeutics

0.29

Correlation Coefficient

Avidity Biosciences  SpringWorks Therapeutics

Modest diversification

The 3 months correlation between Avidity and SpringWorks is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Avidity Biosciences and SpringWorks Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SpringWorks Therapeutics 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 SpringWorks Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SpringWorks Therapeutics has no effect on the direction of Avidity Biosciences i.e., Avidity Biosciences and SpringWorks Therapeutics go up and down completely randomly.

Pair Corralation between Avidity Biosciences and SpringWorks Therapeutics

Considering the 90-day investment horizon Avidity Biosciences is expected to generate 28.78 times more return on investment than SpringWorks Therapeutics. However, Avidity Biosciences is 28.78 times more volatile than SpringWorks Therapeutics. It trades about 0.19 of its potential returns per unit of risk. SpringWorks Therapeutics is currently generating about 0.38 per unit of risk. If you would invest  2,897  in Avidity Biosciences on May 15, 2025 and sell it today you would earn a total of  1,726  from holding Avidity Biosciences or generate 59.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	52.46%
Values	Daily Returns

Avidity Biosciences  vs.  SpringWorks Therapeutics

Avidity Biosciences

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Avidity Biosciences are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Avidity Biosciences sustained solid returns over the last few months and may actually be approaching a breakup point.

SpringWorks Therapeutics

Risk-Adjusted Performance

Strong

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

Pair Trading with Avidity Biosciences and SpringWorks Therapeutics

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

The idea behind Avidity Biosciences and SpringWorks 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 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.