Correlation Between Cardio Diagnostics and Aileron Therapeutics

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

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

Diversification Opportunities for Cardio Diagnostics and Aileron Therapeutics

-0.69

Correlation Coefficient

Cardio Diagnostics  Aileron Therapeutics

Excellent diversification

The 3 months correlation between Cardio and Aileron is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Cardio Diagnostics Holdings and Aileron Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aileron Therapeutics and Cardio Diagnostics 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 Cardio Diagnostics Holdings are associated (or correlated) with Aileron Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aileron Therapeutics has no effect on the direction of Cardio Diagnostics i.e., Cardio Diagnostics and Aileron Therapeutics go up and down completely randomly.

Pair Corralation between Cardio Diagnostics and Aileron Therapeutics

Assuming the 90 days horizon Cardio Diagnostics Holdings is expected to generate 9.32 times more return on investment than Aileron Therapeutics. However, Cardio Diagnostics is 9.32 times more volatile than Aileron Therapeutics. It trades about 0.09 of its potential returns per unit of risk. Aileron Therapeutics is currently generating about 0.03 per unit of risk. If you would invest  4.81  in Cardio Diagnostics Holdings on September 25, 2024 and sell it today you would earn a total of  4.34  from holding Cardio Diagnostics Holdings or generate 90.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	79.23%
Values	Daily Returns

Cardio Diagnostics Holdings  vs.  Aileron Therapeutics

Cardio Diagnostics

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cardio Diagnostics Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Cardio Diagnostics showed solid returns over the last few months and may actually be approaching a breakup point.

Aileron Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aileron Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Cardio Diagnostics and Aileron Therapeutics

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

The idea behind Cardio Diagnostics Holdings and Aileron 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.