Correlation Between Aileron Therapeutics and Chembio Diagnostics

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Can any of the company-specific risk be diversified away by investing in both Aileron Therapeutics and Chembio Diagnostics 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 Aileron Therapeutics and Chembio Diagnostics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aileron Therapeutics and Chembio Diagnostics, you can compare the effects of market volatilities on Aileron Therapeutics and Chembio Diagnostics 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 Aileron Therapeutics with a short position of Chembio Diagnostics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aileron Therapeutics and Chembio Diagnostics.

Diversification Opportunities for Aileron Therapeutics and Chembio Diagnostics

-0.15
  Correlation Coefficient

Good diversification

The 3 months correlation between Aileron and Chembio is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Aileron Therapeutics and Chembio Diagnostics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chembio Diagnostics and Aileron Therapeutics 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 Aileron Therapeutics are associated (or correlated) with Chembio Diagnostics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chembio Diagnostics has no effect on the direction of Aileron Therapeutics i.e., Aileron Therapeutics and Chembio Diagnostics go up and down completely randomly.

Pair Corralation between Aileron Therapeutics and Chembio Diagnostics

Given the investment horizon of 90 days Aileron Therapeutics is expected to under-perform the Chembio Diagnostics. But the stock apears to be less risky and, when comparing its historical volatility, Aileron Therapeutics is 1.54 times less risky than Chembio Diagnostics. The stock trades about -0.04 of its potential returns per unit of risk. The Chembio Diagnostics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  477.00  in Chembio Diagnostics on July 6, 2022 and sell it today you would lose (438.00)  from holding Chembio Diagnostics or give up 91.82% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Aileron Therapeutics  vs.  Chembio Diagnostics

 Performance (%) 
       Timeline  
Aileron Therapeutics 
Aileron Performance
0 of 100
Over the last 90 days Aileron Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Aileron Therapeutics is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Aileron Price Channel

Chembio Diagnostics 
Chembio Performance
0 of 100
Over the last 90 days Chembio Diagnostics has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's primary indicators remain nearly stable which may send shares a bit higher in November 2022. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Chembio Price Channel

Aileron Therapeutics and Chembio Diagnostics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Aileron Therapeutics and Chembio Diagnostics

The main advantage of trading using opposite Aileron Therapeutics and Chembio Diagnostics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aileron Therapeutics position performs unexpectedly, Chembio Diagnostics 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 Chembio Diagnostics will offset losses from the drop in Chembio Diagnostics' long position.
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The idea behind Aileron Therapeutics and Chembio Diagnostics 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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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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