Correlation Between Abcellera Biologics and Nuvalent

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

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

Diversification Opportunities for Abcellera Biologics and Nuvalent

-0.35

Correlation Coefficient

Abcellera Biologics  Nuvalent

Very good diversification

The 3 months correlation between Abcellera and Nuvalent is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Abcellera Biologics and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and Abcellera Biologics 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 Abcellera Biologics 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 Abcellera Biologics i.e., Abcellera Biologics and Nuvalent go up and down completely randomly.

Pair Corralation between Abcellera Biologics and Nuvalent

Given the investment horizon of 90 days Abcellera Biologics is expected to generate 1.9 times more return on investment than Nuvalent. However, Abcellera Biologics is 1.9 times more volatile than Nuvalent. It trades about 0.09 of its potential returns per unit of risk. Nuvalent is currently generating about -0.06 per unit of risk. If you would invest  289.00  in Abcellera Biologics on October 26, 2024 and sell it today you would earn a total of  63.00  from holding Abcellera Biologics or generate 21.8% return on investment over 90 days.

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

Abcellera Biologics  vs.  Nuvalent

Abcellera Biologics

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Abcellera Biologics are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Abcellera Biologics disclosed solid returns over the last few months and may actually be approaching a breakup point.

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.

Pair Trading with Abcellera Biologics and Nuvalent

The main advantage of trading using opposite Abcellera Biologics and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Abcellera Biologics 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.

The idea behind Abcellera Biologics and Nuvalent 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.