Correlation Between Antero Midstream and Edgewise Therapeutics

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

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

Diversification Opportunities for Antero Midstream and Edgewise Therapeutics

-0.68

Correlation Coefficient

Antero Midstream  Edgewise Therapeutics

Excellent diversification

The 3 months correlation between Antero and Edgewise is -0.68. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and Edgewise Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Edgewise Therapeutics and Antero Midstream 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 Antero Midstream Partners are associated (or correlated) with Edgewise Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Edgewise Therapeutics has no effect on the direction of Antero Midstream i.e., Antero Midstream and Edgewise Therapeutics go up and down completely randomly.

Pair Corralation between Antero Midstream and Edgewise Therapeutics

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 0.47 times more return on investment than Edgewise Therapeutics. However, Antero Midstream Partners is 2.11 times less risky than Edgewise Therapeutics. It trades about 0.19 of its potential returns per unit of risk. Edgewise Therapeutics is currently generating about -0.05 per unit of risk. If you would invest  1,493  in Antero Midstream Partners on December 28, 2024 and sell it today you would earn a total of  301.00  from holding Antero Midstream Partners or generate 20.16% return on investment over 90 days.

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

Antero Midstream Partners  vs.  Edgewise Therapeutics

Antero Midstream Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting primary indicators, Antero Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Edgewise Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Edgewise Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Antero Midstream and Edgewise Therapeutics

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

The idea behind Antero Midstream Partners and Edgewise 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.