Correlation Between Aileron Therapeutics and Processa Pharmaceuticals

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

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

Diversification Opportunities for Aileron Therapeutics and Processa Pharmaceuticals

0.11

Correlation Coefficient

Aileron Therapeutics  Processa Pharmaceuticals

Average diversification

The 3 months correlation between Aileron and Processa is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Processa Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Processa Pharmaceuticals 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 Processa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Processa Pharmaceuticals has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Processa Pharmaceuticals go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Processa Pharmaceuticals

Given the investment horizon of 90 days Aileron Therapeutics is expected to generate 1.28 times more return on investment than Processa Pharmaceuticals. However, Aileron Therapeutics is 1.28 times more volatile than Processa Pharmaceuticals. It trades about 0.04 of its potential returns per unit of risk. Processa Pharmaceuticals is currently generating about -0.04 per unit of risk. If you would invest  270.00  in Aileron Therapeutics on September 1, 2024 and sell it today you would earn a total of  16.00  from holding Aileron Therapeutics or generate 5.93% return on investment over 90 days.

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

Aileron Therapeutics  vs.  Processa Pharmaceuticals

Aileron Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

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.

Processa Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Processa Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Aileron Therapeutics and Processa Pharmaceuticals

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

The idea behind Aileron Therapeutics and Processa Pharmaceuticals 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.