Correlation Between Biocardia and Aerovate Therapeutics

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

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

Diversification Opportunities for Biocardia and Aerovate Therapeutics

-0.18

Correlation Coefficient

Biocardia  Aerovate Therapeutics

Good diversification

The 3 months correlation between Biocardia and Aerovate is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Biocardia and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Biocardia 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 Biocardia are associated (or correlated) with Aerovate Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerovate Therapeutics has no effect on the direction of Biocardia i.e., Biocardia and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Biocardia and Aerovate Therapeutics

Given the investment horizon of 90 days Biocardia is expected to generate 2.62 times more return on investment than Aerovate Therapeutics. However, Biocardia is 2.62 times more volatile than Aerovate Therapeutics. It trades about 0.0 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about -0.06 per unit of risk. If you would invest  228.00  in Biocardia on November 28, 2024 and sell it today you would lose (16.00) from holding Biocardia or give up 7.02% of portfolio value over 90 days.

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

Biocardia  vs.  Aerovate Therapeutics

Biocardia

Risk-Adjusted Performance

Very Weak

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

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.

Pair Trading with Biocardia and Aerovate Therapeutics

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

The idea behind Biocardia and Aerovate 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.