Correlation Between Aerovate Therapeutics and Stem Cell

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

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

Diversification Opportunities for Aerovate Therapeutics and Stem Cell

-0.61

Correlation Coefficient

Aerovate Therapeutics  Stem Cell

Excellent diversification

The 3 months correlation between Aerovate and Stem is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Stem Cell Authority in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stem Cell Authority 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 Stem Cell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stem Cell Authority has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Stem Cell go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and Stem Cell

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 11.97 times less return on investment than Stem Cell. But when comparing it to its historical volatility, Aerovate Therapeutics is 14.99 times less risky than Stem Cell. It trades about 0.15 of its potential returns per unit of risk. Stem Cell Authority is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2.00  in Stem Cell Authority on September 13, 2024 and sell it today you would lose (0.54) from holding Stem Cell Authority or give up 27.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Aerovate Therapeutics  vs.  Stem Cell Authority

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

Stem Cell Authority

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Stem Cell Authority are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Stem Cell disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Aerovate Therapeutics and Stem Cell

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

The idea behind Aerovate Therapeutics and Stem Cell Authority 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.