Correlation Between Ikena Oncology and Aerovate Therapeutics

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

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

Diversification Opportunities for Ikena Oncology and Aerovate Therapeutics

-0.1

Correlation Coefficient

Ikena Oncology  Aerovate Therapeutics

Good diversification

The 3 months correlation between Ikena and Aerovate is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Ikena Oncology and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Ikena Oncology 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 Ikena Oncology 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 Ikena Oncology i.e., Ikena Oncology and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Ikena Oncology and Aerovate Therapeutics

Given the investment horizon of 90 days Ikena Oncology is expected to under-perform the Aerovate Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Ikena Oncology is 2.09 times less risky than Aerovate Therapeutics. The stock trades about -0.11 of its potential returns per unit of risk. The Aerovate Therapeutics is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  220.00  in Aerovate Therapeutics on September 23, 2024 and sell it today you would earn a total of  33.00  from holding Aerovate Therapeutics or generate 15.0% return on investment over 90 days.

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

Ikena Oncology  vs.  Aerovate Therapeutics

Ikena Oncology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ikena Oncology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

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 unsteady basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ikena Oncology and Aerovate Therapeutics

The main advantage of trading using opposite Ikena Oncology and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ikena Oncology 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 Ikena Oncology 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.

Check out your portfolio center.

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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.