Correlation Between Aerovate Therapeutics and In8bio

Can any of the company-specific risk be diversified away by investing in both Aerovate Therapeutics and In8bio 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 In8bio into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aerovate Therapeutics and In8bio Inc, you can compare the effects of market volatilities on Aerovate Therapeutics and In8bio 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 In8bio. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerovate Therapeutics and In8bio.

Diversification Opportunities for Aerovate Therapeutics and In8bio

0.29

Correlation Coefficient

Aerovate Therapeutics  In8bio

Modest diversification

The 3 months correlation between Aerovate and In8bio is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and In8bio Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on In8bio Inc 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 In8bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of In8bio Inc has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and In8bio go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and In8bio

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the In8bio. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 4.05 times less risky than In8bio. The stock trades about -0.07 of its potential returns per unit of risk. The In8bio Inc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  30.00  in In8bio Inc on November 29, 2024 and sell it today you would lose (3.00) from holding In8bio Inc or give up 10.0% of portfolio value over 90 days.

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

Aerovate Therapeutics  vs.  In8bio Inc

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

In8bio Inc

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in In8bio Inc are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, In8bio may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Pair Trading with Aerovate Therapeutics and In8bio

The main advantage of trading using opposite Aerovate Therapeutics and In8bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerovate Therapeutics position performs unexpectedly, In8bio 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 In8bio will offset losses from the drop in In8bio's long position.

The idea behind Aerovate Therapeutics and In8bio Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.