Correlation Between LianBio ADR and Aldeyra

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

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

Diversification Opportunities for LianBio ADR and Aldeyra

0.0

Correlation Coefficient

LianBio ADR  Aldeyra

Pay attention - limited upside

The 3 months correlation between LianBio and Aldeyra is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding LianBio ADR and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra and LianBio ADR 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 LianBio ADR are associated (or correlated) with Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of LianBio ADR i.e., LianBio ADR and Aldeyra go up and down completely randomly.

Pair Corralation between LianBio ADR and Aldeyra

Given the investment horizon of 90 days LianBio ADR is expected to generate 7.19 times less return on investment than Aldeyra. But when comparing it to its historical volatility, LianBio ADR is 1.41 times less risky than Aldeyra. It trades about 0.01 of its potential returns per unit of risk. Aldeyra is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  625.00  in Aldeyra on October 7, 2024 and sell it today you would lose (80.00) from holding Aldeyra or give up 12.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	26.41%
Values	Daily Returns

LianBio ADR  vs.  Aldeyra

LianBio ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Aldeyra

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aldeyra are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental indicators, Aldeyra may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LianBio ADR and Aldeyra

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

The idea behind LianBio ADR and Aldeyra 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.