Correlation Between In8bioInc and Aerovate Therapeutics

Can any of the company-specific risk be diversified away by investing in both In8bioInc 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 In8bioInc and Aerovate Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between In8bioInc and Aerovate Therapeutics, you can compare the effects of market volatilities on In8bioInc 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 In8bioInc with a short position of Aerovate Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of In8bioInc and Aerovate Therapeutics.

Diversification Opportunities for In8bioInc and Aerovate Therapeutics

0.27

Correlation Coefficient

In8bioInc  Aerovate Therapeutics

Modest diversification

The 3 months correlation between In8bioInc and Aerovate is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding In8bioInc and Aerovate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aerovate Therapeutics and In8bioInc 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 In8bioInc 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 In8bioInc i.e., In8bioInc and Aerovate Therapeutics go up and down completely randomly.

Pair Corralation between In8bioInc and Aerovate Therapeutics

Given the investment horizon of 90 days In8bioInc is expected to generate 0.84 times more return on investment than Aerovate Therapeutics. However, In8bioInc is 1.19 times less risky than Aerovate Therapeutics. It trades about -0.09 of its potential returns per unit of risk. Aerovate Therapeutics is currently generating about -0.28 per unit of risk. If you would invest  109.00  in In8bioInc on February 8, 2024 and sell it today you would lose (8.00) from holding In8bioInc or give up 7.34% of portfolio value over 90 days.

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

In8bioInc  vs.  Aerovate Therapeutics

In8bioInc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days In8bioInc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Aerovate Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Aerovate Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile basic indicators, Aerovate Therapeutics may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with In8bioInc and Aerovate Therapeutics

The main advantage of trading using opposite In8bioInc and Aerovate Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if In8bioInc 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 In8bioInc 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.