Correlation Between Day One and Aerovate Therapeutics

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

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

Diversification Opportunities for Day One and Aerovate Therapeutics

0.08

Correlation Coefficient

Day One  Aerovate Therapeutics

Significant diversification

The 3 months correlation between Day and Aerovate is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Day One Biopharmaceuticals and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Day One 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 Day One Biopharmaceuticals 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 Day One i.e., Day One and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Day One and Aerovate Therapeutics

Given the investment horizon of 90 days Day One is expected to generate 4.96 times less return on investment than Aerovate Therapeutics. But when comparing it to its historical volatility, Day One Biopharmaceuticals is 1.44 times less risky than Aerovate Therapeutics. It trades about 0.03 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  165.00  in Aerovate Therapeutics on September 15, 2024 and sell it today you would earn a total of  88.00  from holding Aerovate Therapeutics or generate 53.33% return on investment over 90 days.

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

Day One Biopharmaceuticals  vs.  Aerovate Therapeutics

Day One Biopharmaceu

Risk-Adjusted Performance

0 of 100

Very Weak

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

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.

Pair Trading with Day One and Aerovate Therapeutics

The main advantage of trading using opposite Day One and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Day One 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 Day One Biopharmaceuticals 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.