Correlation Between Spero Therapeutics and NextCure
Can any of the company-specific risk be diversified away by investing in both Spero 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 Spero Therapeutics and NextCure into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Spero Therapeutics and NextCure, you can compare the effects of market volatilities on Spero 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 Spero Therapeutics with a short position of NextCure. Check out your portfolio center. Please also check ongoing floating volatility patterns of Spero Therapeutics and NextCure.
Diversification Opportunities for Spero Therapeutics and NextCure
0.46 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Spero and NextCure is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Spero Therapeutics and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Spero 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 Spero Therapeutics 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 Spero Therapeutics i.e., Spero Therapeutics and NextCure go up and down completely randomly.
Pair Corralation between Spero Therapeutics and NextCure
Given the investment horizon of 90 days Spero Therapeutics is expected to under-perform the NextCure. But the stock apears to be less risky and, when comparing its historical volatility, Spero Therapeutics is 1.4 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 0.02 of returns per unit of risk over similar time horizon. If you would invest 141.00 in NextCure on August 23, 2024 and sell it today you would lose (12.00) from holding NextCure or give up 8.51% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Spero Therapeutics vs. NextCure
Performance |
| Timeline |
| Spero Therapeutics |
| NextCure |
Spero Therapeutics and NextCure Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Spero Therapeutics and NextCure
The main advantage of trading using opposite Spero Therapeutics and NextCure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Spero 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.| Spero Therapeutics vs. Assembly Biosciences | Spero Therapeutics vs. Achilles Therapeutics PLC | Spero Therapeutics vs. Instil Bio | Spero Therapeutics vs. CytomX Therapeutics |
| NextCure vs. Kiora Pharmaceuticals | NextCure vs. ZyVersa Therapeutics | NextCure vs. Sonnet Biotherapeutics Holdings | NextCure vs. Zura Bio Limited |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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