Correlation Between Aerovate Therapeutics and VistaGen Therapeutics

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

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

Diversification Opportunities for Aerovate Therapeutics and VistaGen Therapeutics

0.02

Correlation Coefficient

Aerovate Therapeutics  VistaGen Therapeutics

Significant diversification

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

Pair Corralation between Aerovate Therapeutics and VistaGen Therapeutics

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the VistaGen Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 1.87 times less risky than VistaGen Therapeutics. The stock trades about -0.06 of its potential returns per unit of risk. The VistaGen Therapeutics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  284.00  in VistaGen Therapeutics on November 28, 2024 and sell it today you would lose (23.00) from holding VistaGen Therapeutics or give up 8.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Aerovate Therapeutics  vs.  VistaGen Therapeutics

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 latest fragile performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

VistaGen Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days VistaGen Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, VistaGen Therapeutics is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aerovate Therapeutics and VistaGen Therapeutics

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

The idea behind Aerovate Therapeutics and VistaGen Therapeutics 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.