Correlation Between Aerovate Therapeutics and AmTrust Financial

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

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

Diversification Opportunities for Aerovate Therapeutics and AmTrust Financial

-0.08

Correlation Coefficient

Aerovate Therapeutics  AmTrust Financial

Good diversification

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

Pair Corralation between Aerovate Therapeutics and AmTrust Financial

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the AmTrust Financial. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 1.56 times less risky than AmTrust Financial. The stock trades about -0.02 of its potential returns per unit of risk. The AmTrust Financial Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1,379  in AmTrust Financial Services on December 24, 2024 and sell it today you would earn a total of  171.00  from holding AmTrust Financial Services or generate 12.4% return on investment over 90 days.

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

Aerovate Therapeutics  vs.  AmTrust Financial Services

Aerovate Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aerovate Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Aerovate Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

AmTrust Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in AmTrust Financial Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, AmTrust Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and AmTrust Financial

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

The idea behind Aerovate Therapeutics and AmTrust Financial Services 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.