Correlation Between Aerovate Therapeutics and ASML Holding

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

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

Diversification Opportunities for Aerovate Therapeutics and ASML Holding

-0.05

Correlation Coefficient

Aerovate Therapeutics  ASML Holding

Good diversification

The 3 months correlation between Aerovate and ASML is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and ASML Holding NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ASML Holding NV 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 ASML Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ASML Holding NV has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and ASML Holding go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and ASML Holding

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the ASML Holding. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 1.38 times less risky than ASML Holding. The stock trades about -0.04 of its potential returns per unit of risk. The ASML Holding NV is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  69,392  in ASML Holding NV on December 28, 2024 and sell it today you would lose (292.00) from holding ASML Holding NV or give up 0.42% of portfolio value over 90 days.

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

Aerovate Therapeutics  vs.  ASML Holding NV

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.

ASML Holding NV

Risk-Adjusted Performance

Weak

Over the last 90 days ASML Holding NV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable essential indicators, ASML Holding is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aerovate Therapeutics and ASML Holding

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

The idea behind Aerovate Therapeutics and ASML Holding NV 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.

Check out your portfolio center.

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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.