Correlation Between Theriva Biologics and Aerovate Therapeutics

Can any of the company-specific risk be diversified away by investing in both Theriva Biologics 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 Theriva Biologics and Aerovate Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Theriva Biologics and Aerovate Therapeutics, you can compare the effects of market volatilities on Theriva Biologics 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 Theriva Biologics with a short position of Aerovate Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Theriva Biologics and Aerovate Therapeutics.

Diversification Opportunities for Theriva Biologics and Aerovate Therapeutics

-0.65

Correlation Coefficient

Theriva Biologics  Aerovate Therapeutics

Excellent diversification

The 3 months correlation between Theriva and Aerovate is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Theriva Biologics and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and Theriva Biologics 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 Theriva Biologics 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 Theriva Biologics i.e., Theriva Biologics and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between Theriva Biologics and Aerovate Therapeutics

Given the investment horizon of 90 days Theriva Biologics is expected to under-perform the Aerovate Therapeutics. In addition to that, Theriva Biologics is 1.07 times more volatile than Aerovate Therapeutics. It trades about -0.04 of its total potential returns per unit of risk. Aerovate Therapeutics is currently generating about 0.01 per unit of volatility. If you would invest  1,967  in Aerovate Therapeutics on July 19, 2024 and sell it today you would lose (1,735) from holding Aerovate Therapeutics or give up 88.21% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Theriva Biologics  vs.  Aerovate Therapeutics

Theriva Biologics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Theriva Biologics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Aerovate Therapeutics

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Aerovate Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Theriva Biologics and Aerovate Therapeutics

The main advantage of trading using opposite Theriva Biologics and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Theriva Biologics 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 Theriva Biologics 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.

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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 Equity Valuation module to check real value of public entities based on technical and fundamental data.