Correlation Between Cardio Diagnostics and Aerovate Therapeutics

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

By analyzing existing cross correlation between Cardio Diagnostics Holdings and Aerovate Therapeutics, you can compare the effects of market volatilities on Cardio Diagnostics and Aerovate Therapeutics 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 Cardio Diagnostics with a short position of Aerovate Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cardio Diagnostics and Aerovate Therapeutics.

Diversification Opportunities for Cardio Diagnostics and Aerovate Therapeutics

0.22

Correlation Coefficient

Cardio Diagnostics  Aerovate Therapeutics

Modest diversification

The 3 months correlation between Cardio and Aerovate is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Cardio Diagnostics Holdings and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Cardio Diagnostics 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 Cardio Diagnostics Holdings are associated (or correlated) with Aerovate Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aerovate Therapeutics has no effect on the direction of Cardio Diagnostics i.e., Cardio Diagnostics and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Cardio Diagnostics and Aerovate Therapeutics

Given the investment horizon of 90 days Cardio Diagnostics is expected to generate 3.47 times less return on investment than Aerovate Therapeutics. In addition to that, Cardio Diagnostics is 2.67 times more volatile than Aerovate Therapeutics. It trades about 0.02 of its total potential returns per unit of risk. Aerovate Therapeutics is currently generating about 0.17 per unit of volatility. If you would invest  190.00  in Aerovate Therapeutics on September 4, 2024 and sell it today you would earn a total of  76.00  from holding Aerovate Therapeutics or generate 40.0% return on investment over 90 days.

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

Cardio Diagnostics Holdings  vs.  Aerovate Therapeutics

Cardio Diagnostics

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Cardio Diagnostics Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Cardio Diagnostics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Aerovate Therapeutics

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cardio Diagnostics and Aerovate Therapeutics

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

The idea behind Cardio Diagnostics Holdings and Aerovate Therapeutics 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.