Correlation Between NYSE Composite and Adverum Biotechnologies

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

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

Diversification Opportunities for NYSE Composite and Adverum Biotechnologies

-0.44

Correlation Coefficient

NYSE Composite  Adverum Biotechnologies

Very good diversification

The 3 months correlation between NYSE and Adverum is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Adverum Biotechnologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adverum Biotechnologies and NYSE Composite 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 NYSE Composite are associated (or correlated) with Adverum Biotechnologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adverum Biotechnologies has no effect on the direction of NYSE Composite i.e., NYSE Composite and Adverum Biotechnologies go up and down completely randomly.

Pair Corralation between NYSE Composite and Adverum Biotechnologies

Assuming the 90 days trading horizon NYSE Composite is expected to generate 4.99 times less return on investment than Adverum Biotechnologies. But when comparing it to its historical volatility, NYSE Composite is 6.2 times less risky than Adverum Biotechnologies. It trades about 0.02 of its potential returns per unit of risk. Adverum Biotechnologies is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  469.00  in Adverum Biotechnologies on December 29, 2024 and sell it today you would lose (8.00) from holding Adverum Biotechnologies or give up 1.71% of portfolio value over 90 days.

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

NYSE Composite  vs.  Adverum Biotechnologies

Pair Trading with NYSE Composite and Adverum Biotechnologies

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

The idea behind NYSE Composite and Adverum Biotechnologies 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.