Correlation Between PayPal Holdings and Aerovate Therapeutics
Can any of the company-specific risk be diversified away by investing in both PayPal Holdings 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 PayPal Holdings and Aerovate Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PayPal Holdings and Aerovate Therapeutics, you can compare the effects of market volatilities on PayPal Holdings 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 PayPal Holdings with a short position of Aerovate Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of PayPal Holdings and Aerovate Therapeutics.
Diversification Opportunities for PayPal Holdings and Aerovate Therapeutics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PayPal and Aerovate is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding PayPal Holdings and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and PayPal Holdings 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 PayPal Holdings 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 PayPal Holdings i.e., PayPal Holdings and Aerovate Therapeutics go up and down completely randomly.
Pair Corralation between PayPal Holdings and Aerovate Therapeutics
Given the investment horizon of 90 days PayPal Holdings is expected to generate 1.09 times less return on investment than Aerovate Therapeutics. But when comparing it to its historical volatility, PayPal Holdings is 3.07 times less risky than Aerovate Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. 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 |
PayPal Holdings vs. Aerovate Therapeutics
Performance |
| Timeline |
| PayPal Holdings |
| Aerovate Therapeutics |
PayPal Holdings and Aerovate Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PayPal Holdings and Aerovate Therapeutics
The main advantage of trading using opposite PayPal Holdings and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PayPal Holdings 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.| PayPal Holdings vs. American Express | PayPal Holdings vs. Capital One Financial | PayPal Holdings vs. Upstart Holdings | PayPal Holdings vs. Ally Financial |
| Aerovate Therapeutics vs. Adagene | Aerovate Therapeutics vs. Acrivon Therapeutics, Common | Aerovate Therapeutics vs. Rezolute | Aerovate Therapeutics vs. AN2 Therapeutics |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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