Correlation Between AptaBio Therapeutics and Digital Multimedia

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

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

Diversification Opportunities for AptaBio Therapeutics and Digital Multimedia

0.87

Correlation Coefficient

AptaBio Therapeutics  Digital Multimedia

Very poor diversification

The 3 months correlation between AptaBio and Digital is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding AptaBio Therapeutics and Digital Multimedia Technology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital Multimedia and AptaBio 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 AptaBio Therapeutics are associated (or correlated) with Digital Multimedia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital Multimedia has no effect on the direction of AptaBio Therapeutics i.e., AptaBio Therapeutics and Digital Multimedia go up and down completely randomly.

Pair Corralation between AptaBio Therapeutics and Digital Multimedia

Assuming the 90 days trading horizon AptaBio Therapeutics is expected to generate 1.22 times more return on investment than Digital Multimedia. However, AptaBio Therapeutics is 1.22 times more volatile than Digital Multimedia Technology. It trades about -0.17 of its potential returns per unit of risk. Digital Multimedia Technology is currently generating about -0.24 per unit of risk. If you would invest  907,000  in AptaBio Therapeutics on September 12, 2024 and sell it today you would lose (293,000) from holding AptaBio Therapeutics or give up 32.3% of portfolio value over 90 days.

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

AptaBio Therapeutics  vs.  Digital Multimedia Technology

AptaBio Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AptaBio Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Digital Multimedia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Digital Multimedia Technology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with AptaBio Therapeutics and Digital Multimedia

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

The idea behind AptaBio Therapeutics and Digital Multimedia Technology 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.