Correlation Between Opthea and Aerovate Therapeutics

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

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

Diversification Opportunities for Opthea and Aerovate Therapeutics

-0.66

Correlation Coefficient

Opthea  Aerovate Therapeutics

Excellent diversification

The 3 months correlation between Opthea and Aerovate is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Opthea and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Opthea 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 Opthea 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 Opthea i.e., Opthea and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Opthea and Aerovate Therapeutics

Considering the 90-day investment horizon Opthea is expected to generate 3.8 times more return on investment than Aerovate Therapeutics. However, Opthea is 3.8 times more volatile than Aerovate Therapeutics. It trades about 0.0 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  387.00  in Opthea on December 29, 2024 and sell it today you would lose (46.00) from holding Opthea or give up 11.89% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	86.89%
Values	Daily Returns

Opthea  vs.  Aerovate Therapeutics

Opthea

Risk-Adjusted Performance

Very Weak

Over the last 90 days Opthea has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Opthea is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Aerovate Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Aerovate Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Aerovate Therapeutics is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Opthea and Aerovate Therapeutics

The main advantage of trading using opposite Opthea and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Opthea 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 Opthea 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.