Correlation Between Aerovate Therapeutics and UNITEDHEALTH

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

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

Diversification Opportunities for Aerovate Therapeutics and UNITEDHEALTH

-0.58

Correlation Coefficient

Aerovate Therapeutics  UNITEDHEALTH

Excellent diversification

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

Pair Corralation between Aerovate Therapeutics and UNITEDHEALTH

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 16.61 times less return on investment than UNITEDHEALTH. But when comparing it to its historical volatility, Aerovate Therapeutics is 1.19 times less risky than UNITEDHEALTH. It trades about 0.01 of its potential returns per unit of risk. UNITEDHEALTH GROUP INC is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  6,474  in UNITEDHEALTH GROUP INC on September 18, 2024 and sell it today you would earn a total of  613.00  from holding UNITEDHEALTH GROUP INC or generate 9.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Aerovate Therapeutics  vs.  UNITEDHEALTH GROUP INC

Aerovate Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

UNITEDHEALTH GROUP INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days UNITEDHEALTH GROUP INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 UNITEDHEALTH GROUP INC investors.

Pair Trading with Aerovate Therapeutics and UNITEDHEALTH

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

The idea behind Aerovate Therapeutics and UNITEDHEALTH GROUP INC 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.