Correlation Between Aerovate Therapeutics and IBC Advanced

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

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

Diversification Opportunities for Aerovate Therapeutics and IBC Advanced

0.82

Correlation Coefficient

Aerovate Therapeutics  IBC Advanced

Very poor diversification

The 3 months correlation between Aerovate and IBC is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and IBC Advanced Alloys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IBC Advanced Alloys and Aerovate 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 Aerovate Therapeutics are associated (or correlated) with IBC Advanced. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IBC Advanced Alloys has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and IBC Advanced go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and IBC Advanced

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.47 times more return on investment than IBC Advanced. However, Aerovate Therapeutics is 2.12 times less risky than IBC Advanced. It trades about -0.14 of its potential returns per unit of risk. IBC Advanced Alloys is currently generating about -0.22 per unit of risk. If you would invest  268.00  in Aerovate Therapeutics on September 24, 2024 and sell it today you would lose (12.00) from holding Aerovate Therapeutics or give up 4.48% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.24%
Values	Daily Returns

Aerovate Therapeutics  vs.  IBC Advanced Alloys

Aerovate Therapeutics

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

IBC Advanced Alloys

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IBC Advanced Alloys are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak essential indicators, IBC Advanced reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and IBC Advanced

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

The idea behind Aerovate Therapeutics and IBC Advanced Alloys 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.