Correlation Between Xilio Development and Aerovate Therapeutics

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

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

Diversification Opportunities for Xilio Development and Aerovate Therapeutics

0.69

Correlation Coefficient

Xilio Development  Aerovate Therapeutics

Poor diversification

The 3 months correlation between Xilio and Aerovate is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Xilio Development and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Xilio Development 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 Xilio Development 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 Xilio Development i.e., Xilio Development and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Xilio Development and Aerovate Therapeutics

Considering the 90-day investment horizon Xilio Development is expected to generate 1.15 times more return on investment than Aerovate Therapeutics. However, Xilio Development is 1.15 times more volatile than Aerovate Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about 0.01 per unit of risk. If you would invest  108.00  in Xilio Development on September 23, 2024 and sell it today you would earn a total of  20.00  from holding Xilio Development or generate 18.52% return on investment over 90 days.

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

Xilio Development  vs.  Aerovate Therapeutics

Xilio Development

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Xilio Development are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Xilio Development displayed solid returns over the last few months and may actually be approaching a breakup point.

Aerovate Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Xilio Development and Aerovate Therapeutics

The main advantage of trading using opposite Xilio Development and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Xilio Development 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 Xilio Development 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.