Correlation Between Aerovate Therapeutics and Solar Alliance

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

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

Diversification Opportunities for Aerovate Therapeutics and Solar Alliance

-0.58

Correlation Coefficient

Aerovate Therapeutics  Solar Alliance

Excellent diversification

The 3 months correlation between Aerovate and Solar is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Solar Alliance Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solar Alliance Energy 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 Solar Alliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solar Alliance Energy has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Solar Alliance go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Solar Alliance

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 3.56 times less return on investment than Solar Alliance. But when comparing it to its historical volatility, Aerovate Therapeutics is 3.42 times less risky than Solar Alliance. It trades about 0.06 of its potential returns per unit of risk. Solar Alliance Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Solar Alliance Energy on October 20, 2024 and sell it today you would earn a total of  0.08  from holding Solar Alliance Energy or generate 4.0% return on investment over 90 days.

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

Aerovate Therapeutics  vs.  Solar Alliance Energy

Aerovate Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 5 (%) 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.

Solar Alliance Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Solar Alliance Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Aerovate Therapeutics and Solar Alliance

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

The idea behind Aerovate Therapeutics and Solar Alliance Energy 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.