Correlation Between Aerovate Therapeutics and ABIO Old

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

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

Diversification Opportunities for Aerovate Therapeutics and ABIO Old

-0.19

Correlation Coefficient

Aerovate Therapeutics  ABIO Old

Good diversification

The 3 months correlation between Aerovate and ABIO is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and ABIO Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ABIO Old and Aerovate 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 Aerovate Therapeutics are associated (or correlated) with ABIO Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ABIO Old has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and ABIO Old go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and ABIO Old

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.55 times more return on investment than ABIO Old. However, Aerovate Therapeutics is 1.83 times less risky than ABIO Old. It trades about 0.0 of its potential returns per unit of risk. ABIO Old is currently generating about -0.02 per unit of risk. If you would invest  1,968  in Aerovate Therapeutics on October 9, 2024 and sell it today you would lose (1,700) from holding Aerovate Therapeutics or give up 86.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	64.78%
Values	Daily Returns

Aerovate Therapeutics  vs.  ABIO Old

Aerovate Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

ABIO Old

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Aerovate Therapeutics and ABIO Old

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

The idea behind Aerovate Therapeutics and ABIO Old 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.