Correlation Between Aileron Therapeutics and Benitec Biopharma

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

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

Diversification Opportunities for Aileron Therapeutics and Benitec Biopharma

0.56

Correlation Coefficient

Aileron Therapeutics  Benitec Biopharma

Very weak diversification

The 3 months correlation between Aileron and Benitec is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Benitec Biopharma Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benitec Biopharma and Aileron 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 Aileron Therapeutics are associated (or correlated) with Benitec Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benitec Biopharma has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Benitec Biopharma go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Benitec Biopharma

Given the investment horizon of 90 days Aileron Therapeutics is expected to generate 1.11 times less return on investment than Benitec Biopharma. In addition to that, Aileron Therapeutics is 1.27 times more volatile than Benitec Biopharma Ltd. It trades about 0.04 of its total potential returns per unit of risk. Benitec Biopharma Ltd is currently generating about 0.06 per unit of volatility. If you would invest  898.00  in Benitec Biopharma Ltd on September 3, 2024 and sell it today you would earn a total of  111.00  from holding Benitec Biopharma Ltd or generate 12.36% return on investment over 90 days.

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

Aileron Therapeutics  vs.  Benitec Biopharma Ltd

Aileron Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

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

Benitec Biopharma

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Benitec Biopharma Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Benitec Biopharma exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aileron Therapeutics and Benitec Biopharma

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

The idea behind Aileron Therapeutics and Benitec Biopharma Ltd 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.