Correlation Between Aerovate Therapeutics and 71713UAW2

Can any of the company-specific risk be diversified away by investing in both Aerovate Therapeutics and 71713UAW2 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 71713UAW2 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Aerovate Therapeutics and PHARMACIA P 66, you can compare the effects of market volatilities on Aerovate Therapeutics and 71713UAW2 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 71713UAW2. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerovate Therapeutics and 71713UAW2.

Diversification Opportunities for Aerovate Therapeutics and 71713UAW2

0.02

Correlation Coefficient

Aerovate Therapeutics  71713UAW2

Significant diversification

The 3 months correlation between Aerovate and 71713UAW2 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and PHARMACIA P 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHARMACIA P 66 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 71713UAW2. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHARMACIA P 66 has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and 71713UAW2 go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and 71713UAW2

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the 71713UAW2. In addition to that, Aerovate Therapeutics is 1.83 times more volatile than PHARMACIA P 66. It trades about -0.04 of its total potential returns per unit of risk. PHARMACIA P 66 is currently generating about -0.01 per unit of volatility. If you would invest  10,624  in PHARMACIA P 66 on December 30, 2024 and sell it today you would lose (56.00) from holding PHARMACIA P 66 or give up 0.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	83.87%
Values	Daily Returns

Aerovate Therapeutics  vs.  PHARMACIA P 66

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.

PHARMACIA P 66

Risk-Adjusted Performance

Very Weak

Over the last 90 days PHARMACIA P 66 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 71713UAW2 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aerovate Therapeutics and 71713UAW2

The main advantage of trading using opposite Aerovate Therapeutics and 71713UAW2 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerovate Therapeutics position performs unexpectedly, 71713UAW2 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 71713UAW2 will offset losses from the drop in 71713UAW2's long position.

The idea behind Aerovate Therapeutics and PHARMACIA P 66 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..