Correlation Between Assembly Biosciences and Nektar Therapeutics

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

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

Diversification Opportunities for Assembly Biosciences and Nektar Therapeutics

0.75

Correlation Coefficient

Assembly Biosciences  Nektar Therapeutics

Poor diversification

The 3 months correlation between Assembly and Nektar is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Assembly Biosciences and Nektar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nektar Therapeutics and Assembly Biosciences 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 Assembly Biosciences are associated (or correlated) with Nektar Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nektar Therapeutics has no effect on the direction of Assembly Biosciences i.e., Assembly Biosciences and Nektar Therapeutics go up and down completely randomly.

Pair Corralation between Assembly Biosciences and Nektar Therapeutics

Given the investment horizon of 90 days Assembly Biosciences is expected to under-perform the Nektar Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Assembly Biosciences is 1.46 times less risky than Nektar Therapeutics. The stock trades about -0.03 of its potential returns per unit of risk. The Nektar Therapeutics is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  90.00  in Nektar Therapeutics on October 23, 2024 and sell it today you would lose (1.00) from holding Nektar Therapeutics or give up 1.11% of portfolio value over 90 days.

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

Assembly Biosciences  vs.  Nektar Therapeutics

Assembly Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Assembly Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nektar Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nektar Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Assembly Biosciences and Nektar Therapeutics

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

The idea behind Assembly Biosciences and Nektar 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 Stocks Directory module to find actively traded stocks across global markets.