Correlation Between Aerovate Therapeutics and Reunion Neuroscience

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

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

Diversification Opportunities for Aerovate Therapeutics and Reunion Neuroscience

0.79

Correlation Coefficient

Aerovate Therapeutics  Reunion Neuroscience

Poor diversification

The 3 months correlation between Aerovate and Reunion is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Reunion Neuroscience in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reunion Neuroscience 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 Reunion Neuroscience. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reunion Neuroscience has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Reunion Neuroscience go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Reunion Neuroscience

If you would invest  191.00  in Aerovate Therapeutics on September 16, 2024 and sell it today you would earn a total of  62.00  from holding Aerovate Therapeutics or generate 32.46% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.54%
Values	Daily Returns

Aerovate Therapeutics  vs.  Reunion Neuroscience

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.

Reunion Neuroscience

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reunion Neuroscience has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Reunion Neuroscience is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aerovate Therapeutics and Reunion Neuroscience

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

The idea behind Aerovate Therapeutics and Reunion Neuroscience 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.