Correlation Between Adagene and Aura Biosciences

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

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

Diversification Opportunities for Adagene and Aura Biosciences

-0.21

Correlation Coefficient

Adagene  Aura Biosciences

Very good diversification

The 3 months correlation between Adagene and Aura is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Adagene and Aura Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aura Biosciences and Adagene 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 Adagene are associated (or correlated) with Aura Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aura Biosciences has no effect on the direction of Adagene i.e., Adagene and Aura Biosciences go up and down completely randomly.

Pair Corralation between Adagene and Aura Biosciences

Given the investment horizon of 90 days Adagene is expected to under-perform the Aura Biosciences. In addition to that, Adagene is 1.61 times more volatile than Aura Biosciences. It trades about -0.04 of its total potential returns per unit of risk. Aura Biosciences is currently generating about -0.06 per unit of volatility. If you would invest  818.00  in Aura Biosciences on December 21, 2024 and sell it today you would lose (68.00) from holding Aura Biosciences or give up 8.31% of portfolio value over 90 days.

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

Adagene  vs.  Aura Biosciences

Adagene

Risk-Adjusted Performance

Very Weak

Over the last 90 days Adagene has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Aura Biosciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aura Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Adagene and Aura Biosciences

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

The idea behind Adagene and Aura Biosciences 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.