Correlation Between Nkarta and Soleno Therapeutics

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

Diversification Opportunities for Nkarta and Soleno Therapeutics

-0.67
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Nkarta and Soleno is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Nkarta Inc and Soleno Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Soleno Therapeutics 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 Soleno Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Soleno Therapeutics has no effect on the direction of Nkarta i.e., Nkarta and Soleno Therapeutics go up and down completely randomly.

Pair Corralation between Nkarta and Soleno Therapeutics

Given the investment horizon of 90 days Nkarta is expected to generate 8.08 times less return on investment than Soleno Therapeutics. But when comparing it to its historical volatility, Nkarta Inc is 2.8 times less risky than Soleno Therapeutics. It trades about 0.02 of its potential returns per unit of risk. Soleno Therapeutics is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  420.00  in Soleno Therapeutics on August 29, 2024 and sell it today you would earn a total of  5,414  from holding Soleno Therapeutics or generate 1289.05% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Nkarta Inc  vs.  Soleno Therapeutics

 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 unfluctuating performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.
Soleno Therapeutics 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Soleno Therapeutics are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Soleno Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Nkarta and Soleno Therapeutics Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Nkarta and Soleno Therapeutics

The main advantage of trading using opposite Nkarta and Soleno Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nkarta position performs unexpectedly, Soleno 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 Soleno Therapeutics will offset losses from the drop in Soleno Therapeutics' long position.
The idea behind Nkarta Inc and Soleno 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.

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