Correlation Between Aerovate Therapeutics and PayPal Holdings
Can any of the company-specific risk be diversified away by investing in both Aerovate Therapeutics and PayPal Holdings 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 PayPal Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aerovate Therapeutics and PayPal Holdings, you can compare the effects of market volatilities on Aerovate Therapeutics and PayPal Holdings 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 PayPal Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerovate Therapeutics and PayPal Holdings.
Diversification Opportunities for Aerovate Therapeutics and PayPal Holdings
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aerovate and PayPal is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and PayPal Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PayPal Holdings 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 PayPal Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PayPal Holdings has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and PayPal Holdings go up and down completely randomly.
Pair Corralation between Aerovate Therapeutics and PayPal Holdings
Given the investment horizon of 90 days Aerovate Therapeutics is expected to generate 3.07 times more return on investment than PayPal Holdings. However, Aerovate Therapeutics is 3.07 times more volatile than PayPal Holdings. It trades about 0.01 of its potential returns per unit of risk. PayPal Holdings is currently generating about 0.04 per unit of risk. If you would invest 1,628 in Aerovate Therapeutics on September 12, 2024 and sell it today you would lose (1,365) from holding Aerovate Therapeutics or give up 83.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aerovate Therapeutics vs. PayPal Holdings
Performance |
| Timeline |
| Aerovate Therapeutics |
| PayPal Holdings |
Aerovate Therapeutics and PayPal Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aerovate Therapeutics and PayPal Holdings
The main advantage of trading using opposite Aerovate Therapeutics and PayPal Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerovate Therapeutics position performs unexpectedly, PayPal Holdings 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 PayPal Holdings will offset losses from the drop in PayPal Holdings' long position.| Aerovate Therapeutics vs. Adagene | Aerovate Therapeutics vs. Acrivon Therapeutics, Common | Aerovate Therapeutics vs. Rezolute | Aerovate Therapeutics vs. AN2 Therapeutics |
| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Ally Financial |
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..
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