Correlation Between Aerovate Therapeutics and Kronos Bio

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

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

Diversification Opportunities for Aerovate Therapeutics and Kronos Bio

-0.12

Correlation Coefficient

Aerovate Therapeutics  Kronos Bio

Good diversification

The 3 months correlation between Aerovate and Kronos is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Kronos Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kronos Bio 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 Kronos Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kronos Bio has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Kronos Bio go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Kronos Bio

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.51 times more return on investment than Kronos Bio. However, Aerovate Therapeutics is 1.96 times less risky than Kronos Bio. It trades about -0.07 of its potential returns per unit of risk. Kronos Bio is currently generating about -0.15 per unit of risk. If you would invest  269.00  in Aerovate Therapeutics on October 10, 2024 and sell it today you would lose (5.00) from holding Aerovate Therapeutics or give up 1.86% of portfolio value over 90 days.

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

Aerovate Therapeutics  vs.  Kronos Bio

Aerovate Therapeutics

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 10 (%) 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.

Kronos Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Kronos Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Kronos Bio is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aerovate Therapeutics and Kronos Bio

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

The idea behind Aerovate Therapeutics and Kronos Bio 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.