Correlation Between Eterna Therapeutics and Avid Bioservices

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

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

Diversification Opportunities for Eterna Therapeutics and Avid Bioservices

-0.41

Correlation Coefficient

Eterna Therapeutics  Avid Bioservices

Very good diversification

The 3 months correlation between Eterna and Avid is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Eterna Therapeutics and Avid Bioservices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avid Bioservices and Eterna Therapeutics 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 Eterna Therapeutics are associated (or correlated) with Avid Bioservices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avid Bioservices has no effect on the direction of Eterna Therapeutics i.e., Eterna Therapeutics and Avid Bioservices go up and down completely randomly.

Pair Corralation between Eterna Therapeutics and Avid Bioservices

Given the investment horizon of 90 days Eterna Therapeutics is expected to generate 1.46 times less return on investment than Avid Bioservices. But when comparing it to its historical volatility, Eterna Therapeutics is 1.03 times less risky than Avid Bioservices. It trades about 0.03 of its potential returns per unit of risk. Avid Bioservices is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  824.00  in Avid Bioservices on March 1, 2024 and sell it today you would earn a total of  50.00  from holding Avid Bioservices or generate 6.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

Eterna Therapeutics  vs.  Avid Bioservices

Eterna Therapeutics

Risk-Adjusted Performance

2 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eterna Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Eterna Therapeutics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Avid Bioservices

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Avid Bioservices are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Avid Bioservices displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Eterna Therapeutics and Avid Bioservices

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

The idea behind Eterna Therapeutics and Avid Bioservices 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.