Correlation Between HLS Therapeutics and Aion Therapeutic
Can any of the company-specific risk be diversified away by investing in both HLS Therapeutics and Aion Therapeutic 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 HLS Therapeutics and Aion Therapeutic into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HLS Therapeutics and Aion Therapeutic, you can compare the effects of market volatilities on HLS Therapeutics and Aion Therapeutic 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 HLS Therapeutics with a short position of Aion Therapeutic. Check out your portfolio center. Please also check ongoing floating volatility patterns of HLS Therapeutics and Aion Therapeutic.
Diversification Opportunities for HLS Therapeutics and Aion Therapeutic
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between HLS and Aion is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding HLS Therapeutics and Aion Therapeutic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aion Therapeutic and HLS 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 HLS Therapeutics are associated (or correlated) with Aion Therapeutic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aion Therapeutic has no effect on the direction of HLS Therapeutics i.e., HLS Therapeutics and Aion Therapeutic go up and down completely randomly.
Pair Corralation between HLS Therapeutics and Aion Therapeutic
Assuming the 90 days horizon HLS Therapeutics is expected to generate 80.8 times less return on investment than Aion Therapeutic. But when comparing it to its historical volatility, HLS Therapeutics is 22.78 times less risky than Aion Therapeutic. It trades about 0.05 of its potential returns per unit of risk. Aion Therapeutic is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 2.00 in Aion Therapeutic on August 29, 2024 and sell it today you would lose (0.95) from holding Aion Therapeutic or give up 47.5% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HLS Therapeutics vs. Aion Therapeutic
Performance |
| Timeline |
| HLS Therapeutics |
| Aion Therapeutic |
HLS Therapeutics and Aion Therapeutic Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HLS Therapeutics and Aion Therapeutic
The main advantage of trading using opposite HLS Therapeutics and Aion Therapeutic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HLS Therapeutics position performs unexpectedly, Aion Therapeutic 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 Aion Therapeutic will offset losses from the drop in Aion Therapeutic's long position.The idea behind HLS Therapeutics and Aion Therapeutic 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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