Correlation Between Aileron Therapeutics and Guardion Health

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

By analyzing existing cross correlation between Aileron Therapeutics and Guardion Health Sciences, you can compare the effects of market volatilities on Aileron Therapeutics and Guardion Health 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 Guardion Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aileron Therapeutics and Guardion Health.

Diversification Opportunities for Aileron Therapeutics and Guardion Health

-0.43

Correlation Coefficient

Aileron Therapeutics  Guardion Health

Very good diversification

The 3 months correlation between Aileron and Guardion is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Guardion Health Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guardion Health Sciences 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 Guardion Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guardion Health Sciences has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Guardion Health go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Guardion Health

Given the investment horizon of 90 days Aileron Therapeutics is expected to under-perform the Guardion Health. But the stock apears to be less risky and, when comparing its historical volatility, Aileron Therapeutics is 1.36 times less risky than Guardion Health. The stock trades about -0.02 of its potential returns per unit of risk. The Guardion Health Sciences is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  169.00  in Guardion Health Sciences on October 10, 2024 and sell it today you would earn a total of  160.00  from holding Guardion Health Sciences or generate 94.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	78.23%
Values	Daily Returns

Aileron Therapeutics  vs.  Guardion Health Sciences

Aileron Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aileron Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Guardion Health Sciences

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Guardion Health Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly inconsistent basic indicators, Guardion Health may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Aileron Therapeutics and Guardion Health

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

The idea behind Aileron Therapeutics and Guardion Health Sciences 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.