Correlation Between Aerovate Therapeutics and InMode

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

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

Diversification Opportunities for Aerovate Therapeutics and InMode

0.75

Correlation Coefficient

Aerovate Therapeutics  InMode

Poor diversification

The 3 months correlation between Aerovate and InMode is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and InMode in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InMode 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 InMode. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InMode has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and InMode go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and InMode

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.82 times more return on investment than InMode. However, Aerovate Therapeutics is 1.22 times less risky than InMode. It trades about 0.01 of its potential returns per unit of risk. InMode is currently generating about -0.08 per unit of risk. If you would invest  263.00  in Aerovate Therapeutics on September 12, 2024 and sell it today you would earn a total of  0.00  from holding Aerovate Therapeutics or generate 0.0% return on investment over 90 days.

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

Aerovate Therapeutics  vs.  InMode

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.

InMode

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InMode are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, InMode exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and InMode

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

The idea behind Aerovate Therapeutics and InMode 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.