Correlation Between HCW Biologics and Avid Bioservices

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

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

Diversification Opportunities for HCW Biologics and Avid Bioservices

-0.78

Correlation Coefficient

HCW Biologics  Avid Bioservices

Pay attention - limited upside

The 3 months correlation between HCW and Avid is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding HCW Biologics and Avid Bioservices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avid Bioservices and HCW Biologics 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 HCW Biologics 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 HCW Biologics i.e., HCW Biologics and Avid Bioservices go up and down completely randomly.

Pair Corralation between HCW Biologics and Avid Bioservices

Given the investment horizon of 90 days HCW Biologics is expected to under-perform the Avid Bioservices. But the stock apears to be less risky and, when comparing its historical volatility, HCW Biologics is 1.28 times less risky than Avid Bioservices. The stock trades about -0.3 of its potential returns per unit of risk. The Avid Bioservices is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  842.00  in Avid Bioservices on March 7, 2024 and sell it today you would lose (14.00) from holding Avid Bioservices or give up 1.66% of portfolio value over 90 days.

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

HCW Biologics  vs.  Avid Bioservices

HCW Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HCW Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite abnormal performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in July 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Avid Bioservices

Risk-Adjusted Performance

11 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Avid Bioservices are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal primary indicators, Avid Bioservices displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HCW Biologics and Avid Bioservices

The main advantage of trading using opposite HCW Biologics and Avid Bioservices positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HCW Biologics 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 HCW Biologics 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.