Correlation Between Aerovate Therapeutics and Butterfly Network

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

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

Diversification Opportunities for Aerovate Therapeutics and Butterfly Network

0.04

Correlation Coefficient

Aerovate Therapeutics  Butterfly Network

Significant diversification

The 3 months correlation between Aerovate and Butterfly is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Butterfly Network in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Butterfly Network 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 Butterfly Network. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Butterfly Network has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Butterfly Network go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Butterfly Network

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.25 times more return on investment than Butterfly Network. However, Aerovate Therapeutics is 4.04 times less risky than Butterfly Network. It trades about -0.04 of its potential returns per unit of risk. Butterfly Network is currently generating about -0.04 per unit of risk. If you would invest  266.00  in Aerovate Therapeutics on December 29, 2024 and sell it today you would lose (13.00) from holding Aerovate Therapeutics or give up 4.89% of portfolio value over 90 days.

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

Aerovate Therapeutics  vs.  Butterfly Network

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.

Butterfly Network

Risk-Adjusted Performance

Very Weak

Over the last 90 days Butterfly Network has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's essential indicators remain fairly strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aerovate Therapeutics and Butterfly Network

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

The idea behind Aerovate Therapeutics and Butterfly Network 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.