Correlation Between AptaBio Therapeutics and ABL Bio

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

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

Diversification Opportunities for AptaBio Therapeutics and ABL Bio

0.84

Correlation Coefficient

AptaBio Therapeutics  ABL Bio

Very poor diversification

The 3 months correlation between AptaBio and ABL is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding AptaBio Therapeutics and ABL Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABL Bio and AptaBio 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 AptaBio Therapeutics are associated (or correlated) with ABL Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABL Bio has no effect on the direction of AptaBio Therapeutics i.e., AptaBio Therapeutics and ABL Bio go up and down completely randomly.

Pair Corralation between AptaBio Therapeutics and ABL Bio

Assuming the 90 days trading horizon AptaBio Therapeutics is expected to generate 2.1 times less return on investment than ABL Bio. But when comparing it to its historical volatility, AptaBio Therapeutics is 1.23 times less risky than ABL Bio. It trades about 0.09 of its potential returns per unit of risk. ABL Bio is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,750,000  in ABL Bio on November 28, 2024 and sell it today you would earn a total of  1,210,000  from holding ABL Bio or generate 44.0% return on investment over 90 days.

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

AptaBio Therapeutics  vs.  ABL Bio

AptaBio Therapeutics

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AptaBio Therapeutics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, AptaBio Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

ABL Bio

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ABL Bio are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, ABL Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with AptaBio Therapeutics and ABL Bio

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

The idea behind AptaBio Therapeutics and ABL Bio 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.