Correlation Between Aerovate Therapeutics and Replimune

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

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

Diversification Opportunities for Aerovate Therapeutics and Replimune

0.57

Correlation Coefficient

Aerovate Therapeutics  Replimune

Very weak diversification

The 3 months correlation between Aerovate and Replimune is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Replimune Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Replimune Group 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 Replimune. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Replimune Group has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Replimune go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Replimune

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.64 times more return on investment than Replimune. However, Aerovate Therapeutics is 1.56 times less risky than Replimune. It trades about 0.13 of its potential returns per unit of risk. Replimune Group is currently generating about 0.05 per unit of risk. If you would invest  198.00  in Aerovate Therapeutics on September 19, 2024 and sell it today you would earn a total of  58.00  from holding Aerovate Therapeutics or generate 29.29% return on investment over 90 days.

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

Aerovate Therapeutics  vs.  Replimune Group

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 inconsistent basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Replimune Group

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Replimune Group are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Replimune disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and Replimune

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

The idea behind Aerovate Therapeutics and Replimune Group 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.