Correlation Between Aileron Therapeutics and Zenith Capital

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

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

Diversification Opportunities for Aileron Therapeutics and Zenith Capital

-0.12

Correlation Coefficient

Aileron Therapeutics  Zenith Capital

Good diversification

The 3 months correlation between Aileron and Zenith is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Zenith Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Zenith Capital Corp 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 Zenith Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Zenith Capital Corp has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Zenith Capital go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Zenith Capital

Given the investment horizon of 90 days Aileron Therapeutics is expected to under-perform the Zenith Capital. But the stock apears to be less risky and, when comparing its historical volatility, Aileron Therapeutics is 41.01 times less risky than Zenith Capital. The stock trades about -0.05 of its potential returns per unit of risk. The Zenith Capital Corp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  10.00  in Zenith Capital Corp on September 13, 2024 and sell it today you would earn a total of  0.00  from holding Zenith Capital Corp or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.46%
Values	Daily Returns

Aileron Therapeutics  vs.  Zenith Capital Corp

Aileron Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aileron Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Zenith Capital Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Zenith Capital Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Zenith Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aileron Therapeutics and Zenith Capital

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

The idea behind Aileron Therapeutics and Zenith Capital Corp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.