Correlation Between Aerovate Therapeutics and Bank of AmericaPFD SER B

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

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

Diversification Opportunities for Aerovate Therapeutics and Bank of AmericaPFD SER B

0.03

Correlation Coefficient

Aerovate Therapeutics  Bank of AmericaPFD SER B

Significant diversification

The 3 months correlation between Aerovate and Bank is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Bank of America in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of AmericaPFD SER B 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 Bank of AmericaPFD SER B . Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of AmericaPFD SER B has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Bank of AmericaPFD SER B go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Bank of AmericaPFD SER B

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 29.76 times less return on investment than Bank of AmericaPFD SER B . But when comparing it to its historical volatility, Aerovate Therapeutics is 7.96 times less risky than Bank of AmericaPFD SER B . It trades about 0.03 of its potential returns per unit of risk. Bank of America is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  21,349  in Bank of America on October 22, 2024 and sell it today you would earn a total of  3,651  from holding Bank of America or generate 17.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Aerovate Therapeutics  vs.  Bank of America

Aerovate Therapeutics

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 8 (%) 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.

Bank of AmericaPFD SER B

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of America are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Bank of AmericaPFD SER B reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and Bank of AmericaPFD SER B

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

The idea behind Aerovate Therapeutics and Bank of America 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.