Correlation Between Aadi Bioscience and Abeona Therapeutics

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

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

Diversification Opportunities for Aadi Bioscience and Abeona Therapeutics

0.72

Correlation Coefficient

Aadi Bioscience  Abeona Therapeutics

Poor diversification

The 3 months correlation between Aadi and Abeona is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Aadi Bioscience and Abeona Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Abeona Therapeutics and Aadi Bioscience 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 Aadi Bioscience are associated (or correlated) with Abeona Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Abeona Therapeutics has no effect on the direction of Aadi Bioscience i.e., Aadi Bioscience and Abeona Therapeutics go up and down completely randomly.

Pair Corralation between Aadi Bioscience and Abeona Therapeutics

Given the investment horizon of 90 days Aadi Bioscience is expected to generate 0.26 times more return on investment than Abeona Therapeutics. However, Aadi Bioscience is 3.88 times less risky than Abeona Therapeutics. It trades about -0.27 of its potential returns per unit of risk. Abeona Therapeutics is currently generating about -0.2 per unit of risk. If you would invest  217.00  in Aadi Bioscience on January 25, 2024 and sell it today you would lose (38.50) from holding Aadi Bioscience or give up 17.74% of portfolio value over 90 days.

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

Aadi Bioscience  vs.  Abeona Therapeutics

Aadi Bioscience

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Aadi Bioscience are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Aadi Bioscience demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Abeona Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Abeona Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Abeona Therapeutics is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Aadi Bioscience and Abeona Therapeutics

The main advantage of trading using opposite Aadi Bioscience and Abeona Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aadi Bioscience position performs unexpectedly, Abeona 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 Abeona Therapeutics will offset losses from the drop in Abeona Therapeutics' long position.

The idea behind Aadi Bioscience and Abeona 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.