Correlation Between Nuvalent and Eterna Therapeutics

Can any of the company-specific risk be diversified away by investing in both Nuvalent and Eterna 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 Nuvalent and Eterna Therapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Nuvalent and Eterna Therapeutics, you can compare the effects of market volatilities on Nuvalent and Eterna 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 Nuvalent with a short position of Eterna Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuvalent and Eterna Therapeutics.

Diversification Opportunities for Nuvalent and Eterna Therapeutics

-0.29

Correlation Coefficient

Nuvalent  Eterna Therapeutics

Very good diversification

The 3 months correlation between Nuvalent and Eterna is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Eterna Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eterna Therapeutics and Nuvalent 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 Nuvalent are associated (or correlated) with Eterna Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eterna Therapeutics has no effect on the direction of Nuvalent i.e., Nuvalent and Eterna Therapeutics go up and down completely randomly.

Pair Corralation between Nuvalent and Eterna Therapeutics

Given the investment horizon of 90 days Nuvalent is expected to under-perform the Eterna Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Nuvalent is 2.21 times less risky than Eterna Therapeutics. The stock trades about -0.08 of its potential returns per unit of risk. The Eterna Therapeutics is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  164.00  in Eterna Therapeutics on February 18, 2024 and sell it today you would earn a total of  36.00  from holding Eterna Therapeutics or generate 21.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nuvalent  vs.  Eterna Therapeutics

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Eterna Therapeutics

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Eterna Therapeutics are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Eterna Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuvalent and Eterna Therapeutics

The main advantage of trading using opposite Nuvalent and Eterna Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nuvalent position performs unexpectedly, Eterna 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 Eterna Therapeutics will offset losses from the drop in Eterna Therapeutics' long position.

The idea behind Nuvalent and Eterna 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.