Correlation Between Nkarta and HCW Biologics

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

Diversification Opportunities for Nkarta and HCW Biologics

0.14
  Correlation Coefficient

Average diversification

The 3 months correlation between Nkarta and HCW is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding Nkarta Inc and HCW Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HCW Biologics and Nkarta 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 Nkarta Inc are associated (or correlated) with HCW Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HCW Biologics has no effect on the direction of Nkarta i.e., Nkarta and HCW Biologics go up and down completely randomly.

Pair Corralation between Nkarta and HCW Biologics

Given the investment horizon of 90 days Nkarta Inc is expected to generate 0.99 times more return on investment than HCW Biologics. However, Nkarta Inc is 1.01 times less risky than HCW Biologics. It trades about -0.02 of its potential returns per unit of risk. HCW Biologics is currently generating about -0.19 per unit of risk. If you would invest  250.00  in Nkarta Inc on October 24, 2024 and sell it today you would lose (6.00) from holding Nkarta Inc or give up 2.4% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy94.74%
ValuesDaily Returns

Nkarta Inc  vs.  HCW Biologics

 Performance 
       Timeline  
Nkarta Inc 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Nkarta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.
HCW Biologics 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in HCW Biologics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, HCW Biologics sustained solid returns over the last few months and may actually be approaching a breakup point.

Nkarta and HCW Biologics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nkarta and HCW Biologics

The main advantage of trading using opposite Nkarta and HCW Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nkarta position performs unexpectedly, HCW Biologics 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 HCW Biologics will offset losses from the drop in HCW Biologics' long position.
The idea behind Nkarta Inc and HCW Biologics 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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