Correlation Between Aerovate Therapeutics and Sprott Focus

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

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

Diversification Opportunities for Aerovate Therapeutics and Sprott Focus

0.83

Correlation Coefficient

Aerovate Therapeutics  Sprott Focus

Very poor diversification

The 3 months correlation between Aerovate and Sprott is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Sprott Focus Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Focus Trust 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 Sprott Focus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Focus Trust has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Sprott Focus go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Sprott Focus

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 2.72 times less return on investment than Sprott Focus. In addition to that, Aerovate Therapeutics is 2.87 times more volatile than Sprott Focus Trust. It trades about 0.01 of its total potential returns per unit of risk. Sprott Focus Trust is currently generating about 0.07 per unit of volatility. If you would invest  807.00  in Sprott Focus Trust on September 12, 2024 and sell it today you would earn a total of  9.00  from holding Sprott Focus Trust or generate 1.12% return on investment over 90 days.

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

Aerovate Therapeutics  vs.  Sprott Focus Trust

Aerovate Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 12 (%) 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.

Sprott Focus Trust

Risk-Adjusted Performance

13 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Sprott Focus may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aerovate Therapeutics and Sprott Focus

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

The idea behind Aerovate Therapeutics and Sprott Focus Trust 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.