Correlation Between Aerovate Therapeutics and China Petroleum

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

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

Diversification Opportunities for Aerovate Therapeutics and China Petroleum

-0.66

Correlation Coefficient

Aerovate Therapeutics  China Petroleum

Excellent diversification

The 3 months correlation between Aerovate and China is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and China Petroleum Chemical in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Petroleum Chemical 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 China Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Petroleum Chemical has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and China Petroleum go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and China Petroleum

Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 0.93 times more return on investment than China Petroleum. However, Aerovate Therapeutics is 1.07 times less risky than China Petroleum. It trades about 0.14 of its potential returns per unit of risk. China Petroleum Chemical is currently generating about 0.02 per unit of risk. 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Aerovate Therapeutics  vs.  China Petroleum Chemical

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.

China Petroleum Chemical

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in China Petroleum Chemical are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable primary indicators, China Petroleum is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Aerovate Therapeutics and China Petroleum

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

The idea behind Aerovate Therapeutics and China Petroleum Chemical 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.

Check out your portfolio center.

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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.