Correlation Between Small Cap and Nuvalent
Can any of the company-specific risk be diversified away by investing in both Small Cap 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 Small Cap and Nuvalent into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Small Cap Premium and Nuvalent, you can compare the effects of market volatilities on Small Cap 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 Small Cap with a short position of Nuvalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Small Cap and Nuvalent.
Diversification Opportunities for Small Cap and Nuvalent
Good diversification
The 3 months correlation between Small and Nuvalent is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Small Cap Premium and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and Small Cap 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 Small Cap Premium 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 Small Cap i.e., Small Cap and Nuvalent go up and down completely randomly.
Pair Corralation between Small Cap and Nuvalent
Considering the 90-day investment horizon Small Cap is expected to generate 11.9 times less return on investment than Nuvalent. But when comparing it to its historical volatility, Small Cap Premium is 8.84 times less risky than Nuvalent. It trades about 0.05 of its potential returns per unit of risk. Nuvalent is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 8,364 in Nuvalent on August 31, 2024 and sell it today you would earn a total of 1,312 from holding Nuvalent or generate 15.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Small Cap Premium vs. Nuvalent
Performance |
| Timeline |
| Small Cap Premium |
| Nuvalent |
Small Cap and Nuvalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Small Cap and Nuvalent
The main advantage of trading using opposite Small Cap and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Small Cap 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.| Small Cap vs. RiverNorth Specialty Finance | Small Cap vs. Royce Micro Cap | Small Cap vs. First Trust Enhanced | Small Cap vs. Voya Global Advantage |
| Nuvalent vs. Arcellx | Nuvalent vs. Vaxcyte | Nuvalent vs. Viridian Therapeutics | Nuvalent vs. Ventyx Biosciences |
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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Transaction History View history of all your transactions and understand their impact on performance | |
| Financial Widgets Easily integrated Macroaxis content with over 30 different plug-and-play financial widgets | |
| Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
| Content Syndication Quickly integrate customizable finance content to your own investment portal |