Correlation Between Lumos Pharma and Aerovate Therapeutics
Can any of the company-specific risk be diversified away by investing in both Lumos Pharma 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 Lumos Pharma and Aerovate Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lumos Pharma and Aerovate Therapeutics, you can compare the effects of market volatilities on Lumos Pharma 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 Lumos Pharma with a short position of Aerovate Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lumos Pharma and Aerovate Therapeutics.
Diversification Opportunities for Lumos Pharma and Aerovate Therapeutics
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lumos and Aerovate is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Lumos Pharma and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Lumos Pharma 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 Lumos Pharma 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 Lumos Pharma i.e., Lumos Pharma and Aerovate Therapeutics go up and down completely randomly.
Pair Corralation between Lumos Pharma and Aerovate Therapeutics
Given the investment horizon of 90 days Lumos Pharma is expected to generate 0.4 times more return on investment than Aerovate Therapeutics. However, Lumos Pharma is 2.5 times less risky than Aerovate Therapeutics. It trades about -0.05 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about -0.05 per unit of risk. If you would invest 442.00 in Lumos Pharma on September 4, 2024 and sell it today you would lose (4.00) from holding Lumos Pharma or give up 0.9% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lumos Pharma vs. Aerovate Therapeutics
Performance |
| Timeline |
| Lumos Pharma |
| Aerovate Therapeutics |
Lumos Pharma and Aerovate Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lumos Pharma and Aerovate Therapeutics
The main advantage of trading using opposite Lumos Pharma and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lumos Pharma 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.| Lumos Pharma vs. Candel Therapeutics | Lumos Pharma vs. Cingulate Warrants | Lumos Pharma vs. Unicycive Therapeutics | Lumos Pharma vs. Cardio Diagnostics Holdings |
| Aerovate Therapeutics vs. Candel Therapeutics | Aerovate Therapeutics vs. Cingulate Warrants | Aerovate Therapeutics vs. Unicycive Therapeutics | Aerovate Therapeutics vs. Cardio Diagnostics Holdings |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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