Correlation Between Monte Rosa and Aerovate Therapeutics

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Can any of the company-specific risk be diversified away by investing in both Monte Rosa 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 Monte Rosa and Aerovate Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Monte Rosa Therapeutics and Aerovate Therapeutics, you can compare the effects of market volatilities on Monte Rosa 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 Monte Rosa with a short position of Aerovate Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Monte Rosa and Aerovate Therapeutics.

Diversification Opportunities for Monte Rosa and Aerovate Therapeutics

0.74
  Correlation Coefficient

Poor diversification

The 3 months correlation between Monte and Aerovate is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Monte Rosa Therapeutics and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Monte Rosa 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 Monte Rosa Therapeutics 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 Monte Rosa i.e., Monte Rosa and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Monte Rosa and Aerovate Therapeutics

Given the investment horizon of 90 days Monte Rosa Therapeutics is expected to under-perform the Aerovate Therapeutics. In addition to that, Monte Rosa is 1.1 times more volatile than Aerovate Therapeutics. It trades about -0.08 of its total potential returns per unit of risk. Aerovate Therapeutics is currently generating about 0.23 per unit of volatility. If you would invest  218.00  in Aerovate Therapeutics on August 28, 2024 and sell it today you would earn a total of  50.00  from holding Aerovate Therapeutics or generate 22.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Monte Rosa Therapeutics  vs.  Aerovate Therapeutics

 Performance 
       Timeline  
Monte Rosa Therapeutics 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Monte Rosa Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Monte Rosa exhibited solid returns over the last few months and may actually be approaching a breakup point.
Aerovate Therapeutics 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Monte Rosa and Aerovate Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Monte Rosa and Aerovate Therapeutics

The main advantage of trading using opposite Monte Rosa and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Monte Rosa 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 Monte Rosa Therapeutics 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.
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.

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