Correlation Between Aileron Therapeutics and Leap Therapeutics

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

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

Diversification Opportunities for Aileron Therapeutics and Leap Therapeutics

0.31

Correlation Coefficient

Aileron Therapeutics  Leap Therapeutics

Weak diversification

The 3 months correlation between Aileron and Leap is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Leap Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Leap Therapeutics 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 Leap Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Leap Therapeutics has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Leap Therapeutics go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Leap Therapeutics

Given the investment horizon of 90 days Aileron Therapeutics is expected to under-perform the Leap Therapeutics. In addition to that, Aileron Therapeutics is 1.09 times more volatile than Leap Therapeutics. It trades about -0.04 of its total potential returns per unit of risk. Leap Therapeutics is currently generating about 0.06 per unit of volatility. If you would invest  281.00  in Leap Therapeutics on September 12, 2024 and sell it today you would earn a total of  35.00  from holding Leap Therapeutics or generate 12.46% return on investment over 90 days.

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

Aileron Therapeutics  vs.  Leap Therapeutics

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.

Leap Therapeutics

Risk-Adjusted Performance

4 of 100

Insignificant

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

Pair Trading with Aileron Therapeutics and Leap Therapeutics

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

The idea behind Aileron Therapeutics and Leap Therapeutics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.