Correlation Between Aileron Therapeutics and Ascletis Pharma

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

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

Diversification Opportunities for Aileron Therapeutics and Ascletis Pharma

0.21

Correlation Coefficient

Aileron Therapeutics  Ascletis Pharma

Modest diversification

The 3 months correlation between Aileron and Ascletis is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Ascletis Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ascletis Pharma and Aileron 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 Aileron Therapeutics are associated (or correlated) with Ascletis Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ascletis Pharma has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Ascletis Pharma go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Ascletis Pharma

Given the investment horizon of 90 days Aileron Therapeutics is expected to generate 1.38 times less return on investment than Ascletis Pharma. In addition to that, Aileron Therapeutics is 1.6 times more volatile than Ascletis Pharma. It trades about 0.04 of its total potential returns per unit of risk. Ascletis Pharma is currently generating about 0.1 per unit of volatility. If you would invest  15.00  in Ascletis Pharma on August 31, 2024 and sell it today you would earn a total of  3.00  from holding Ascletis Pharma or generate 20.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Aileron Therapeutics  vs.  Ascletis Pharma

Aileron Therapeutics

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aileron Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent basic indicators, Aileron Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Ascletis Pharma

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ascletis Pharma are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting essential indicators, Ascletis Pharma reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aileron Therapeutics and Ascletis Pharma

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

The idea behind Aileron Therapeutics and Ascletis Pharma 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.