Correlation Between Arad Investment and Nextage Therapeutics

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

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

Diversification Opportunities for Arad Investment and Nextage Therapeutics

-0.42

Correlation Coefficient

Arad Investment  Nextage Therapeutics

Very good diversification

The 3 months correlation between Arad and Nextage is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Arad Investment Industrial and Nextage Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextage Therapeutics and Arad Investment 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 Arad Investment Industrial 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 Arad Investment i.e., Arad Investment and Nextage Therapeutics go up and down completely randomly.

Pair Corralation between Arad Investment and Nextage Therapeutics

Assuming the 90 days trading horizon Arad Investment Industrial is expected to under-perform the Nextage Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Arad Investment Industrial is 1.76 times less risky than Nextage Therapeutics. The stock trades about -0.2 of its potential returns per unit of risk. The Nextage Therapeutics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,860  in Nextage Therapeutics on December 21, 2024 and sell it today you would earn a total of  1,250  from holding Nextage Therapeutics or generate 14.11% return on investment over 90 days.

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

Arad Investment Industrial  vs.  Nextage Therapeutics

Arad Investment Indu

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arad Investment Industrial 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 April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nextage Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nextage Therapeutics are ranked lower than 5 (%) 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 Arad Investment and Nextage Therapeutics

The main advantage of trading using opposite Arad Investment and Nextage Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arad Investment 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 Arad Investment Industrial 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.

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.