Correlation Between Aerovate Therapeutics and Ameren Illinois

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

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

Diversification Opportunities for Aerovate Therapeutics and Ameren Illinois

-0.51

Correlation Coefficient

Aerovate Therapeutics  Ameren Illinois

Excellent diversification

The 3 months correlation between Aerovate and Ameren is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Ameren Illinois in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameren Illinois 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 Ameren Illinois. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameren Illinois has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Ameren Illinois go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Ameren Illinois

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the Ameren Illinois. In addition to that, Aerovate Therapeutics is 2.9 times more volatile than Ameren Illinois. It trades about -0.04 of its total potential returns per unit of risk. Ameren Illinois is currently generating about 0.11 per unit of volatility. If you would invest  7,581  in Ameren Illinois on December 29, 2024 and sell it today you would earn a total of  319.00  from holding Ameren Illinois or generate 4.21% return on investment over 90 days.

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

Aerovate Therapeutics  vs.  Ameren Illinois

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Ameren Illinois

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ameren Illinois are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Ameren Illinois is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aerovate Therapeutics and Ameren Illinois

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

The idea behind Aerovate Therapeutics and Ameren Illinois 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.