Correlation Between Aadi Bioscience and Equillium

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

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

Diversification Opportunities for Aadi Bioscience and Equillium

-0.37

Correlation Coefficient

Aadi Bioscience  Equillium

Very good diversification

The 3 months correlation between Aadi and Equillium is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Aadi Bioscience and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium and Aadi Bioscience 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 Aadi Bioscience are associated (or correlated) with Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of Aadi Bioscience i.e., Aadi Bioscience and Equillium go up and down completely randomly.

Pair Corralation between Aadi Bioscience and Equillium

Given the investment horizon of 90 days Aadi Bioscience is expected to under-perform the Equillium. But the stock apears to be less risky and, when comparing its historical volatility, Aadi Bioscience is 1.42 times less risky than Equillium. The stock trades about -0.02 of its potential returns per unit of risk. The Equillium is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  84.00  in Equillium on September 12, 2024 and sell it today you would lose (14.00) from holding Equillium or give up 16.67% of portfolio value over 90 days.

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

Aadi Bioscience  vs.  Equillium

Aadi Bioscience

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aadi Bioscience are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Aadi Bioscience demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equillium is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Aadi Bioscience and Equillium

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

The idea behind Aadi Bioscience and Equillium 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.