Correlation Between AnaptysBio and Terns Pharmaceuticals

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

Diversification Opportunities for AnaptysBio and Terns Pharmaceuticals

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between AnaptysBio and Terns is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding AnaptysBio and Terns Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terns Pharmaceuticals 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 Terns Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terns Pharmaceuticals has no effect on the direction of AnaptysBio i.e., AnaptysBio and Terns Pharmaceuticals go up and down completely randomly.

Pair Corralation between AnaptysBio and Terns Pharmaceuticals

Given the investment horizon of 90 days AnaptysBio is expected to under-perform the Terns Pharmaceuticals. In addition to that, AnaptysBio is 2.13 times more volatile than Terns Pharmaceuticals. It trades about -0.18 of its total potential returns per unit of risk. Terns Pharmaceuticals is currently generating about -0.18 per unit of volatility. If you would invest  675.00  in Terns Pharmaceuticals on August 25, 2024 and sell it today you would lose (96.00) from holding Terns Pharmaceuticals or give up 14.22% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

AnaptysBio  vs.  Terns Pharmaceuticals

 Performance 
       Timeline  
AnaptysBio 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
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 December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Terns Pharmaceuticals 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Terns 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 very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

AnaptysBio and Terns Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with AnaptysBio and Terns Pharmaceuticals

The main advantage of trading using opposite AnaptysBio and Terns Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AnaptysBio position performs unexpectedly, Terns Pharmaceuticals 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 Terns Pharmaceuticals will offset losses from the drop in Terns Pharmaceuticals' long position.
The idea behind AnaptysBio and Terns Pharmaceuticals 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.

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