Correlation Between Sprott Focus and Aerovate Therapeutics

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

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

Diversification Opportunities for Sprott Focus and Aerovate Therapeutics

-0.21

Correlation Coefficient

Sprott Focus  Aerovate Therapeutics

Very good diversification

The 3 months correlation between Sprott and Aerovate is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Sprott Focus Trust and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Sprott Focus 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 Sprott Focus Trust 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 Sprott Focus i.e., Sprott Focus and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Sprott Focus and Aerovate Therapeutics

Given the investment horizon of 90 days Sprott Focus Trust is expected to generate 0.48 times more return on investment than Aerovate Therapeutics. However, Sprott Focus Trust is 2.08 times less risky than Aerovate Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  712.00  in Sprott Focus Trust on December 29, 2024 and sell it today you would earn a total of  24.00  from holding Sprott Focus Trust or generate 3.37% return on investment over 90 days.

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

Sprott Focus Trust  vs.  Aerovate Therapeutics

Sprott Focus Trust

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Focus Trust are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Sprott Focus is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

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 recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Sprott Focus and Aerovate Therapeutics

The main advantage of trading using opposite Sprott Focus and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sprott Focus 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 Sprott Focus Trust 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.