Correlation Between SalMar ASA and Aerovate Therapeutics

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

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

Diversification Opportunities for SalMar ASA and Aerovate Therapeutics

-0.28

Correlation Coefficient

SalMar ASA  Aerovate Therapeutics

Very good diversification

The 3 months correlation between SalMar and Aerovate is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding SalMar ASA and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and SalMar ASA 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 SalMar ASA 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 SalMar ASA i.e., SalMar ASA and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between SalMar ASA and Aerovate Therapeutics

Assuming the 90 days horizon SalMar ASA is expected to generate 1.84 times more return on investment than Aerovate Therapeutics. However, SalMar ASA is 1.84 times more volatile than Aerovate Therapeutics. It trades about 0.03 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about -0.04 per unit of risk. If you would invest  1,202  in SalMar ASA on December 29, 2024 and sell it today you would earn a total of  29.00  from holding SalMar ASA or generate 2.41% return on investment over 90 days.

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

SalMar ASA  vs.  Aerovate Therapeutics

SalMar ASA

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SalMar ASA are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, SalMar ASA 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

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 SalMar ASA and Aerovate Therapeutics

The main advantage of trading using opposite SalMar ASA and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SalMar ASA 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 SalMar ASA 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.