Correlation Between Aerovate Therapeutics and DriveItAway

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

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

Diversification Opportunities for Aerovate Therapeutics and DriveItAway

-0.58

Correlation Coefficient

Aerovate Therapeutics  DriveItAway

Excellent diversification

The 3 months correlation between Aerovate and DriveItAway is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and DriveItAway in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DriveItAway 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 DriveItAway. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DriveItAway has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and DriveItAway go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and DriveItAway

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the DriveItAway. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 2.46 times less risky than DriveItAway. The stock trades about -0.04 of its potential returns per unit of risk. The DriveItAway is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2.00  in DriveItAway on December 28, 2024 and sell it today you would earn a total of  1.00  from holding DriveItAway or generate 50.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.31%
Values	Daily Returns

Aerovate Therapeutics  vs.  DriveItAway

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.

DriveItAway

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in DriveItAway are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, DriveItAway showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and DriveItAway

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

The idea behind Aerovate Therapeutics and DriveItAway 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.