Correlation Between ATRION and Anika Therapeutics

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

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

Diversification Opportunities for ATRION and Anika Therapeutics

0.51

Correlation Coefficient

ATRION  Anika Therapeutics

Very weak diversification

The 3 months correlation between ATRION and Anika is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding ATRION and Anika Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Anika Therapeutics and ATRION 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 ATRION are associated (or correlated) with Anika Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Anika Therapeutics has no effect on the direction of ATRION i.e., ATRION and Anika Therapeutics go up and down completely randomly.

Pair Corralation between ATRION and Anika Therapeutics

Given the investment horizon of 90 days ATRION is expected to generate 1.14 times more return on investment than Anika Therapeutics. However, ATRION is 1.14 times more volatile than Anika Therapeutics. It trades about 0.15 of its potential returns per unit of risk. Anika Therapeutics is currently generating about 0.02 per unit of risk. If you would invest  40,310  in ATRION on February 11, 2024 and sell it today you would earn a total of  4,225  from holding ATRION or generate 10.48% return on investment over 90 days.

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

ATRION  vs.  Anika Therapeutics

ATRION

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ATRION are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly uncertain basic indicators, ATRION demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Anika Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Anika Therapeutics are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating forward indicators, Anika Therapeutics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with ATRION and Anika Therapeutics

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

The idea behind ATRION and Anika 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.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.