Correlation Between Kamada and Nextage Therapeutics

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

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

Diversification Opportunities for Kamada and Nextage Therapeutics

-0.62

Correlation Coefficient

Kamada  Nextage Therapeutics

Excellent diversification

The 3 months correlation between Kamada and Nextage is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Kamada and Nextage Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextage Therapeutics and Kamada 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 Kamada are associated (or correlated) with Nextage Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextage Therapeutics has no effect on the direction of Kamada i.e., Kamada and Nextage Therapeutics go up and down completely randomly.

Pair Corralation between Kamada and Nextage Therapeutics

Assuming the 90 days trading horizon Kamada is expected to generate 0.36 times more return on investment than Nextage Therapeutics. However, Kamada is 2.76 times less risky than Nextage Therapeutics. It trades about -0.11 of its potential returns per unit of risk. Nextage Therapeutics is currently generating about -0.28 per unit of risk. If you would invest  198,400  in Kamada on February 26, 2024 and sell it today you would lose (6,600) from holding Kamada or give up 3.33% of portfolio value over 90 days.

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

Kamada  vs.  Nextage Therapeutics

Kamada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kamada has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Nextage Therapeutics

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nextage Therapeutics are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nextage Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kamada and Nextage Therapeutics

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

The idea behind Kamada and Nextage 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.