Correlation Between Aerovate Therapeutics and MASSACHUSETTS

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

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

Diversification Opportunities for Aerovate Therapeutics and MASSACHUSETTS

-0.51

Correlation Coefficient

Aerovate Therapeutics  MASSACHUSETTS

Excellent diversification

The 3 months correlation between Aerovate and MASSACHUSETTS is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and MASSACHUSETTS INST TECHNOLOGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MASSACHUSETTS INST 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 MASSACHUSETTS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MASSACHUSETTS INST has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and MASSACHUSETTS go up and down completely randomly.

Pair Corralation between Aerovate Therapeutics and MASSACHUSETTS

Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the MASSACHUSETTS. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 2.0 times less risky than MASSACHUSETTS. The stock trades about -0.14 of its potential returns per unit of risk. The MASSACHUSETTS INST TECHNOLOGY is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  9,203  in MASSACHUSETTS INST TECHNOLOGY on September 24, 2024 and sell it today you would earn a total of  477.00  from holding MASSACHUSETTS INST TECHNOLOGY or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Aerovate Therapeutics  vs.  MASSACHUSETTS INST TECHNOLOGY

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

MASSACHUSETTS INST

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MASSACHUSETTS INST TECHNOLOGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, MASSACHUSETTS is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Aerovate Therapeutics and MASSACHUSETTS

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

The idea behind Aerovate Therapeutics and MASSACHUSETTS INST TECHNOLOGY 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..