Correlation Between Adaptimmune Therapeutics and NextCure
Can any of the company-specific risk be diversified away by investing in both Adaptimmune Therapeutics and NextCure 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 Adaptimmune Therapeutics and NextCure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Adaptimmune Therapeutics Plc and NextCure, you can compare the effects of market volatilities on Adaptimmune Therapeutics and NextCure 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 Adaptimmune Therapeutics with a short position of NextCure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Adaptimmune Therapeutics and NextCure.
Diversification Opportunities for Adaptimmune Therapeutics and NextCure
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Adaptimmune and NextCure is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Adaptimmune Therapeutics Plc and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Adaptimmune 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 Adaptimmune Therapeutics Plc are associated (or correlated) with NextCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextCure has no effect on the direction of Adaptimmune Therapeutics i.e., Adaptimmune Therapeutics and NextCure go up and down completely randomly.
Pair Corralation between Adaptimmune Therapeutics and NextCure
Given the investment horizon of 90 days Adaptimmune Therapeutics Plc is expected to under-perform the NextCure. But the stock apears to be less risky and, when comparing its historical volatility, Adaptimmune Therapeutics Plc is 1.59 times less risky than NextCure. The stock trades about -0.02 of its potential returns per unit of risk. The NextCure is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 82.00 in NextCure on November 2, 2024 and sell it today you would lose (2.00) from holding NextCure or give up 2.44% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Adaptimmune Therapeutics Plc vs. NextCure
Performance |
| Timeline |
| Adaptimmune Therapeutics |
| NextCure |
Adaptimmune Therapeutics and NextCure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Adaptimmune Therapeutics and NextCure
The main advantage of trading using opposite Adaptimmune Therapeutics and NextCure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Adaptimmune Therapeutics position performs unexpectedly, NextCure 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 NextCure will offset losses from the drop in NextCure's long position.The idea behind Adaptimmune Therapeutics Plc and NextCure 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 the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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