Correlation Between Larimar Therapeutics and Aptevo Therapeutics

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

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

Diversification Opportunities for Larimar Therapeutics and Aptevo Therapeutics

0.15

Correlation Coefficient

Larimar Therapeutics  Aptevo Therapeutics

Average diversification

The 3 months correlation between Larimar and Aptevo is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Larimar Therapeutics and Aptevo Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aptevo Therapeutics and Larimar 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 Larimar Therapeutics are associated (or correlated) with Aptevo Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aptevo Therapeutics has no effect on the direction of Larimar Therapeutics i.e., Larimar Therapeutics and Aptevo Therapeutics go up and down completely randomly.

Pair Corralation between Larimar Therapeutics and Aptevo Therapeutics

Given the investment horizon of 90 days Larimar Therapeutics is expected to under-perform the Aptevo Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Larimar Therapeutics is 2.63 times less risky than Aptevo Therapeutics. The stock trades about -0.01 of its potential returns per unit of risk. The Aptevo Therapeutics is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,221  in Aptevo Therapeutics on September 14, 2024 and sell it today you would lose (220.00) from holding Aptevo Therapeutics or give up 18.02% of portfolio value over 90 days.

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

Larimar Therapeutics  vs.  Aptevo Therapeutics

Larimar Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Larimar Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Larimar Therapeutics is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Aptevo Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aptevo Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Aptevo Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Larimar Therapeutics and Aptevo Therapeutics

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

The idea behind Larimar Therapeutics and Aptevo 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.