Correlation Between Aerovate Therapeutics and Alphabet

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

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

Diversification Opportunities for Aerovate Therapeutics and Alphabet

0.5

Correlation Coefficient

Aerovate Therapeutics  Alphabet

Very weak diversification

The 3 months correlation between Aerovate and Alphabet is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Alphabet Inc Class C in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alphabet Class C 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 Alphabet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alphabet Class C has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Alphabet go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Alphabet

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.91 times more return on investment than Alphabet. However, Aerovate Therapeutics is 1.1 times less risky than Alphabet. It trades about -0.04 of its potential returns per unit of risk. Alphabet Inc Class C is currently generating about -0.12 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	Weak
Accuracy	100.0%
Values	Daily Returns

Aerovate Therapeutics  vs.  Alphabet Inc Class C

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.

Alphabet Class C

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alphabet Inc Class C has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aerovate Therapeutics and Alphabet

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

The idea behind Aerovate Therapeutics and Alphabet Inc Class C 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..