Correlation Between Aerovate Therapeutics and Lifecore Biomedical

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

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

Diversification Opportunities for Aerovate Therapeutics and Lifecore Biomedical

0.6

Correlation Coefficient

Aerovate Therapeutics  Lifecore Biomedical

Poor diversification

The 3 months correlation between Aerovate and Lifecore is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Lifecore Biomedical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lifecore Biomedical 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 Lifecore Biomedical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lifecore Biomedical has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Lifecore Biomedical go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Lifecore Biomedical

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.43 times more return on investment than Lifecore Biomedical. However, Aerovate Therapeutics is 2.31 times less risky than Lifecore Biomedical. It trades about -0.07 of its potential returns per unit of risk. Lifecore Biomedical is currently generating about -0.08 per unit of risk. If you would invest  263.00  in Aerovate Therapeutics on November 28, 2024 and sell it today you would lose (22.00) from holding Aerovate Therapeutics or give up 8.37% of portfolio value over 90 days.

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

Aerovate Therapeutics  vs.  Lifecore Biomedical

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.

Lifecore Biomedical

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lifecore Biomedical has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Aerovate Therapeutics and Lifecore Biomedical

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

The idea behind Aerovate Therapeutics and Lifecore Biomedical 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.