Correlation Between Aerovate Therapeutics and Opthea

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

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

Diversification Opportunities for Aerovate Therapeutics and Opthea

-0.66

Correlation Coefficient

Aerovate Therapeutics  Opthea

Excellent diversification

The 3 months correlation between Aerovate and Opthea is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Opthea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Opthea 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 Opthea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Opthea has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Opthea go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Opthea

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the Opthea. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 3.8 times less risky than Opthea. The stock trades about -0.04 of its potential returns per unit of risk. The Opthea is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  387.00  in Opthea on December 29, 2024 and sell it today you would lose (46.00) from holding Opthea or give up 11.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.89%
Values	Daily Returns

Aerovate Therapeutics  vs.  Opthea

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.

Opthea

Risk-Adjusted Performance

Very Weak

Over the last 90 days Opthea has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Opthea is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Aerovate Therapeutics and Opthea

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

The idea behind Aerovate Therapeutics and Opthea 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.