Correlation Between Aileron Therapeutics and Sino Biopharmaceutica

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

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

Diversification Opportunities for Aileron Therapeutics and Sino Biopharmaceutica

-0.08

Correlation Coefficient

Aileron Therapeutics  Sino Biopharmaceutica

Good diversification

The 3 months correlation between Aileron and Sino is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Sino Biopharmaceutical Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sino Biopharmaceutical 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 Sino Biopharmaceutica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sino Biopharmaceutical has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Sino Biopharmaceutica go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Sino Biopharmaceutica

Given the investment horizon of 90 days Aileron Therapeutics is expected to under-perform the Sino Biopharmaceutica. In addition to that, Aileron Therapeutics is 2.31 times more volatile than Sino Biopharmaceutical Ltd. It trades about -0.05 of its total potential returns per unit of risk. Sino Biopharmaceutical Ltd is currently generating about 0.08 per unit of volatility. If you would invest  800.00  in Sino Biopharmaceutical Ltd on September 13, 2024 and sell it today you would earn a total of  105.00  from holding Sino Biopharmaceutical Ltd or generate 13.13% return on investment over 90 days.

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

Aileron Therapeutics  vs.  Sino Biopharmaceutical Ltd

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.

Sino Biopharmaceutical

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sino Biopharmaceutical Ltd are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain primary indicators, Sino Biopharmaceutica showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aileron Therapeutics and Sino Biopharmaceutica

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

The idea behind Aileron Therapeutics and Sino Biopharmaceutical 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.