The Frenchman is thought to be in the market for an attack-minded player following a season-ending injury to England international Theo Walcott, who ruptured his anterior cruciate ligament earlier in January.
Germany international Draxler has been touted as a possible replacement, with reports on Friday suggesting a deal was close to being agreed.
However, Wenger denied those reports, saying: "There is nothing happening. That (the Draxler rumour) is an illusion.
He added on BT Sport: "There is no news about that at all. At the moment some other clubs make the headlines, we don't."
"In the first half we did the job and took the game to them in a serious way and played the way we know we can," added Wenger.
"In the second half we dropped off and, give them credit, they gave it a go. Coventry should be pleased with their performance and we should be pleased with the result."
