Correlation Between AnaptysBio and Revolution Medicines

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Can any of the company-specific risk be diversified away by investing in both AnaptysBio and Revolution Medicines 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 AnaptysBio and Revolution Medicines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AnaptysBio and Revolution Medicines, you can compare the effects of market volatilities on AnaptysBio and Revolution Medicines 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 AnaptysBio with a short position of Revolution Medicines. Check out your portfolio center. Please also check ongoing floating volatility patterns of AnaptysBio and Revolution Medicines.

Diversification Opportunities for AnaptysBio and Revolution Medicines

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between AnaptysBio and Revolution is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding AnaptysBio and Revolution Medicines in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revolution Medicines and AnaptysBio 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 AnaptysBio are associated (or correlated) with Revolution Medicines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revolution Medicines has no effect on the direction of AnaptysBio i.e., AnaptysBio and Revolution Medicines go up and down completely randomly.

Pair Corralation between AnaptysBio and Revolution Medicines

Given the investment horizon of 90 days AnaptysBio is expected to generate 1.28 times more return on investment than Revolution Medicines. However, AnaptysBio is 1.28 times more volatile than Revolution Medicines. It trades about 0.18 of its potential returns per unit of risk. Revolution Medicines is currently generating about -0.02 per unit of risk. If you would invest  1,436  in AnaptysBio on November 9, 2024 and sell it today you would earn a total of  172.00  from holding AnaptysBio or generate 11.98% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

AnaptysBio  vs.  Revolution Medicines

 Performance 
       Timeline  
AnaptysBio 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days AnaptysBio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
Revolution Medicines 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Revolution Medicines has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

AnaptysBio and Revolution Medicines Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AnaptysBio and Revolution Medicines

The main advantage of trading using opposite AnaptysBio and Revolution Medicines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AnaptysBio position performs unexpectedly, Revolution Medicines 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 Revolution Medicines will offset losses from the drop in Revolution Medicines' long position.
The idea behind AnaptysBio and Revolution Medicines 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.

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