Correlation Between Aerovate Therapeutics and Quoin Pharmaceuticals

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

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

Diversification Opportunities for Aerovate Therapeutics and Quoin Pharmaceuticals

0.41

Correlation Coefficient

Aerovate Therapeutics  Quoin Pharmaceuticals

Very weak diversification

The 3 months correlation between Aerovate and Quoin is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Quoin Pharmaceuticals Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Quoin Pharmaceuticals 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 Quoin Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Quoin Pharmaceuticals has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Quoin Pharmaceuticals go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Quoin Pharmaceuticals

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the Quoin Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 6.06 times less risky than Quoin Pharmaceuticals. The stock trades about -0.15 of its potential returns per unit of risk. The Quoin Pharmaceuticals Ltd is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  59.00  in Quoin Pharmaceuticals Ltd on September 23, 2024 and sell it today you would lose (2.00) from holding Quoin Pharmaceuticals Ltd or give up 3.39% of portfolio value over 90 days.

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

Aerovate Therapeutics  vs.  Quoin Pharmaceuticals Ltd

Aerovate Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 11 (%) 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.

Quoin Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Quoin Pharmaceuticals Ltd are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Quoin Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and Quoin Pharmaceuticals

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

The idea behind Aerovate Therapeutics and Quoin Pharmaceuticals Ltd 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.