Correlation Between Aerovate Therapeutics and CONSOLIDATED

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

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

Diversification Opportunities for Aerovate Therapeutics and CONSOLIDATED

0.55

Correlation Coefficient

Aerovate Therapeutics  CONSOLIDATED

Very weak diversification

The 3 months correlation between Aerovate and CONSOLIDATED is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and CONSOLIDATED EDISON N in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CONSOLIDATED EDISON 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 CONSOLIDATED. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CONSOLIDATED EDISON has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and CONSOLIDATED go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and CONSOLIDATED

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the CONSOLIDATED. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 1.29 times less risky than CONSOLIDATED. The stock trades about -0.2 of its potential returns per unit of risk. The CONSOLIDATED EDISON N is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  8,020  in CONSOLIDATED EDISON N on December 5, 2024 and sell it today you would lose (76.00) from holding CONSOLIDATED EDISON N or give up 0.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	80.95%
Values	Daily Returns

Aerovate Therapeutics  vs.  CONSOLIDATED EDISON N

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

CONSOLIDATED EDISON

Risk-Adjusted Performance

Very Weak

Over the last 90 days CONSOLIDATED EDISON N has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for CONSOLIDATED EDISON N investors.

Pair Trading with Aerovate Therapeutics and CONSOLIDATED

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

The idea behind Aerovate Therapeutics and CONSOLIDATED EDISON N 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.