Correlation Between Ibio and Aldeyra

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

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

Diversification Opportunities for Ibio and Aldeyra

-0.4

Correlation Coefficient

Ibio  Aldeyra

Very good diversification

The 3 months correlation between Ibio and Aldeyra is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Ibio Inc and Aldeyra in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aldeyra and Ibio 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 Ibio Inc are associated (or correlated) with Aldeyra. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aldeyra has no effect on the direction of Ibio i.e., Ibio and Aldeyra go up and down completely randomly.

Pair Corralation between Ibio and Aldeyra

Given the investment horizon of 90 days Ibio Inc is expected to generate 1.49 times more return on investment than Aldeyra. However, Ibio is 1.49 times more volatile than Aldeyra. It trades about 0.15 of its potential returns per unit of risk. Aldeyra is currently generating about -0.1 per unit of risk. If you would invest  184.00  in Ibio Inc on September 4, 2024 and sell it today you would earn a total of  96.00  from holding Ibio Inc or generate 52.17% return on investment over 90 days.

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

Ibio Inc  vs.  Aldeyra

Ibio Inc

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ibio Inc are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward indicators, Ibio displayed solid returns over the last few months and may actually be approaching a breakup point.

Aldeyra

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aldeyra has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Ibio and Aldeyra

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

The idea behind Ibio Inc and Aldeyra 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.