Correlation Between Bicycle Therapeutics and NewAmsterdam Pharma

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

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

Diversification Opportunities for Bicycle Therapeutics and NewAmsterdam Pharma

-0.44

Correlation Coefficient

Bicycle Therapeutics  NewAmsterdam Pharma

Very good diversification

The 3 months correlation between Bicycle and NewAmsterdam is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Bicycle Therapeutics and NewAmsterdam Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewAmsterdam Pharma and Bicycle Therapeutics 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 Bicycle Therapeutics are associated (or correlated) with NewAmsterdam Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewAmsterdam Pharma has no effect on the direction of Bicycle Therapeutics i.e., Bicycle Therapeutics and NewAmsterdam Pharma go up and down completely randomly.

Pair Corralation between Bicycle Therapeutics and NewAmsterdam Pharma

Given the investment horizon of 90 days Bicycle Therapeutics is expected to generate 4.81 times less return on investment than NewAmsterdam Pharma. But when comparing it to its historical volatility, Bicycle Therapeutics is 1.15 times less risky than NewAmsterdam Pharma. It trades about 0.02 of its potential returns per unit of risk. NewAmsterdam Pharma is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  950.00  in NewAmsterdam Pharma on September 15, 2024 and sell it today you would earn a total of  1,559  from holding NewAmsterdam Pharma or generate 164.11% return on investment over 90 days.

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

Bicycle Therapeutics  vs.  NewAmsterdam Pharma

Bicycle Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bicycle Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

NewAmsterdam Pharma

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, NewAmsterdam Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bicycle Therapeutics and NewAmsterdam Pharma

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

The idea behind Bicycle Therapeutics and NewAmsterdam Pharma 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.