Correlation Between Aerovate Therapeutics and Umbra Applied
Can any of the company-specific risk be diversified away by investing in both Aerovate Therapeutics and Umbra Applied 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 Umbra Applied into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aerovate Therapeutics and Umbra Applied Technologies, you can compare the effects of market volatilities on Aerovate Therapeutics and Umbra Applied 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 Umbra Applied. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aerovate Therapeutics and Umbra Applied.
Diversification Opportunities for Aerovate Therapeutics and Umbra Applied
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Aerovate and Umbra is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aerovate Therapeutics and Umbra Applied Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Umbra Applied Techno 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 Umbra Applied. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Umbra Applied Techno has no effect on the direction of Aerovate Therapeutics i.e., Aerovate Therapeutics and Umbra Applied go up and down completely randomly.
Pair Corralation between Aerovate Therapeutics and Umbra Applied
Given the investment horizon of 90 days Aerovate Therapeutics is expected to under-perform the Umbra Applied. But the stock apears to be less risky and, when comparing its historical volatility, Aerovate Therapeutics is 4.07 times less risky than Umbra Applied. The stock trades about -0.08 of its potential returns per unit of risk. The Umbra Applied Technologies is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 0.32 in Umbra Applied Technologies on September 13, 2024 and sell it today you would earn a total of 0.17 from holding Umbra Applied Technologies or generate 53.12% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Aerovate Therapeutics vs. Umbra Applied Technologies
Performance |
| Timeline |
| Aerovate Therapeutics |
| Umbra Applied Techno |
Aerovate Therapeutics and Umbra Applied Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aerovate Therapeutics and Umbra Applied
The main advantage of trading using opposite Aerovate Therapeutics and Umbra Applied positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aerovate Therapeutics position performs unexpectedly, Umbra Applied 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 Umbra Applied will offset losses from the drop in Umbra Applied's long position.| Aerovate Therapeutics vs. Adagene | Aerovate Therapeutics vs. Acrivon Therapeutics, Common | Aerovate Therapeutics vs. Rezolute | Aerovate Therapeutics vs. AN2 Therapeutics |
| Umbra Applied vs. World Oil Group | Umbra Applied vs. NN Inc | Umbra Applied vs. 3M Company | Umbra Applied vs. Global Tech Industries |
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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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