Correlation Between CSL and Nuvalent
Can any of the company-specific risk be diversified away by investing in both CSL and Nuvalent 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 CSL and Nuvalent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CSL and Nuvalent, you can compare the effects of market volatilities on CSL and Nuvalent 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 CSL with a short position of Nuvalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of CSL and Nuvalent.
Diversification Opportunities for CSL and Nuvalent
Significant diversification
The 3 months correlation between CSL and Nuvalent is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding CSL and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and CSL 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 CSL are associated (or correlated) with Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of CSL i.e., CSL and Nuvalent go up and down completely randomly.
Pair Corralation between CSL and Nuvalent
Assuming the 90 days horizon CSL is expected to under-perform the Nuvalent. But the pink sheet apears to be less risky and, when comparing its historical volatility, CSL is 1.63 times less risky than Nuvalent. The pink sheet trades about -0.27 of its potential returns per unit of risk. The Nuvalent is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 9,269 in Nuvalent on August 27, 2024 and sell it today you would earn a total of 224.00 from holding Nuvalent or generate 2.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CSL vs. Nuvalent
Performance |
| Timeline |
| CSL |
| Nuvalent |
CSL and Nuvalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CSL and Nuvalent
The main advantage of trading using opposite CSL and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CSL position performs unexpectedly, Nuvalent 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 Nuvalent will offset losses from the drop in Nuvalent's long position.The idea behind CSL and Nuvalent 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.| Nuvalent vs. Eliem Therapeutics | Nuvalent vs. HCW Biologics | Nuvalent vs. Scpharmaceuticals | Nuvalent vs. Milestone Pharmaceuticals |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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