Correlation Between Magenta Therapeutics and Aerovate Therapeutics

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

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

Diversification Opportunities for Magenta Therapeutics and Aerovate Therapeutics

0.39

Correlation Coefficient

Magenta Therapeutics  Aerovate Therapeutics

Weak diversification

The 3 months correlation between Magenta and Aerovate is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Magenta Therapeutics and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Magenta Therapeutics 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 Magenta Therapeutics 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 Magenta Therapeutics i.e., Magenta Therapeutics and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Magenta Therapeutics and Aerovate Therapeutics

If you would invest  245.00  in Aerovate Therapeutics on September 1, 2024 and sell it today you would earn a total of  18.00  from holding Aerovate Therapeutics or generate 7.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	4.76%
Values	Daily Returns

Magenta Therapeutics  vs.  Aerovate Therapeutics

Magenta Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magenta Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Magenta Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Aerovate Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Magenta Therapeutics and Aerovate Therapeutics

The main advantage of trading using opposite Magenta Therapeutics and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magenta Therapeutics 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 Magenta Therapeutics 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.