Correlation Between Aileron Therapeutics and Kane Biotech

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

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

Diversification Opportunities for Aileron Therapeutics and Kane Biotech

0.6

Correlation Coefficient

Aileron Therapeutics  Kane Biotech

Poor diversification

The 3 months correlation between Aileron and Kane is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Kane Biotech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kane Biotech 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 Kane Biotech. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kane Biotech has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Kane Biotech go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Kane Biotech

Given the investment horizon of 90 days Aileron Therapeutics is expected to under-perform the Kane Biotech. In addition to that, Aileron Therapeutics is 1.78 times more volatile than Kane Biotech. It trades about -0.04 of its total potential returns per unit of risk. Kane Biotech is currently generating about -0.05 per unit of volatility. If you would invest  9.26  in Kane Biotech on September 14, 2024 and sell it today you would lose (1.26) from holding Kane Biotech or give up 13.61% of portfolio value over 90 days.

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

Aileron Therapeutics  vs.  Kane Biotech

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 January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Kane Biotech

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aileron Therapeutics and Kane Biotech

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

The idea behind Aileron Therapeutics and Kane Biotech 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.