Correlation Between Lyell Immunopharma and Aerovate Therapeutics

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

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

Diversification Opportunities for Lyell Immunopharma and Aerovate Therapeutics

-0.31

Correlation Coefficient

Lyell Immunopharma  Aerovate Therapeutics

Very good diversification

The 3 months correlation between Lyell and Aerovate is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Lyell Immunopharma and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Lyell Immunopharma 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 Lyell Immunopharma 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 Lyell Immunopharma i.e., Lyell Immunopharma and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Lyell Immunopharma and Aerovate Therapeutics

Given the investment horizon of 90 days Lyell Immunopharma is expected to under-perform the Aerovate Therapeutics. In addition to that, Lyell Immunopharma is 4.89 times more volatile than Aerovate Therapeutics. It trades about -0.24 of its total potential returns per unit of risk. Aerovate Therapeutics is currently generating about -0.07 per unit of volatility. If you would invest  269.00  in Aerovate Therapeutics on October 10, 2024 and sell it today you would lose (5.00) from holding Aerovate Therapeutics or give up 1.86% of portfolio value over 90 days.

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

Lyell Immunopharma  vs.  Aerovate Therapeutics

Lyell Immunopharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyell Immunopharma has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Aerovate Therapeutics

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyell Immunopharma and Aerovate Therapeutics

The main advantage of trading using opposite Lyell Immunopharma and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lyell Immunopharma 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 Lyell Immunopharma 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.