Correlation Between AVROBIO and Freeline Therapeutics

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

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

Diversification Opportunities for AVROBIO and Freeline Therapeutics

0.12

Correlation Coefficient

AVROBIO  Freeline Therapeutics

Average diversification

The 3 months correlation between AVROBIO and Freeline is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding AVROBIO and Freeline Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freeline Therapeutics and AVROBIO 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 AVROBIO are associated (or correlated) with Freeline Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freeline Therapeutics has no effect on the direction of AVROBIO i.e., AVROBIO and Freeline Therapeutics go up and down completely randomly.

Pair Corralation between AVROBIO and Freeline Therapeutics

Given the investment horizon of 90 days AVROBIO is expected to generate 0.97 times more return on investment than Freeline Therapeutics. However, AVROBIO is 1.04 times less risky than Freeline Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Freeline Therapeutics Holdings is currently generating about -0.02 per unit of risk. If you would invest  90.00  in AVROBIO on September 4, 2024 and sell it today you would earn a total of  50.00  from holding AVROBIO or generate 55.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	36.57%
Values	Daily Returns

AVROBIO  vs.  Freeline Therapeutics Holdings

AVROBIO

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AVROBIO has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, AVROBIO is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Freeline Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freeline Therapeutics Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Freeline Therapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with AVROBIO and Freeline Therapeutics

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

The idea behind AVROBIO and Freeline Therapeutics Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.