Correlation Between Aris Water and Elicio Therapeutics

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

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

Diversification Opportunities for Aris Water and Elicio Therapeutics

0.59

Correlation Coefficient

Aris Water  Elicio Therapeutics

Very weak diversification

The 3 months correlation between Aris and Elicio is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Aris Water Solutions and Elicio Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Elicio Therapeutics and Aris Water 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 Aris Water Solutions are associated (or correlated) with Elicio Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Elicio Therapeutics has no effect on the direction of Aris Water i.e., Aris Water and Elicio Therapeutics go up and down completely randomly.

Pair Corralation between Aris Water and Elicio Therapeutics

Given the investment horizon of 90 days Aris Water Solutions is expected to generate 0.48 times more return on investment than Elicio Therapeutics. However, Aris Water Solutions is 2.1 times less risky than Elicio Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Elicio Therapeutics is currently generating about 0.02 per unit of risk. If you would invest  1,328  in Aris Water Solutions on September 25, 2024 and sell it today you would earn a total of  1,196  from holding Aris Water Solutions or generate 90.06% return on investment over 90 days.

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

Aris Water Solutions  vs.  Elicio Therapeutics

Aris Water Solutions

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aris Water Solutions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak forward indicators, Aris Water unveiled solid returns over the last few months and may actually be approaching a breakup point.

Elicio Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Elicio Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Elicio Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Aris Water and Elicio Therapeutics

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

The idea behind Aris Water Solutions and Elicio Therapeutics 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.