Correlation Between Burning Rock and Nektar Therapeutics

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

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

Diversification Opportunities for Burning Rock and Nektar Therapeutics

-0.88

Correlation Coefficient

Burning Rock  Nektar Therapeutics

Pay attention - limited upside

The 3 months correlation between Burning and Nektar is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Burning Rock Biotech and Nektar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nektar Therapeutics and Burning Rock 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 Burning Rock Biotech 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 Burning Rock i.e., Burning Rock and Nektar Therapeutics go up and down completely randomly.

Pair Corralation between Burning Rock and Nektar Therapeutics

Considering the 90-day investment horizon Burning Rock is expected to generate 2.46 times less return on investment than Nektar Therapeutics. In addition to that, Burning Rock is 1.16 times more volatile than Nektar Therapeutics. It trades about 0.04 of its total potential returns per unit of risk. Nektar Therapeutics is currently generating about 0.11 per unit of volatility. If you would invest  102.00  in Nektar Therapeutics on October 6, 2024 and sell it today you would earn a total of  8.00  from holding Nektar Therapeutics or generate 7.84% return on investment over 90 days.

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

Burning Rock Biotech  vs.  Nektar Therapeutics

Burning Rock Biotech

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Burning Rock Biotech are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Burning Rock reported solid returns over the last few months and may actually be approaching a breakup point.

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 latest weak performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Burning Rock and Nektar Therapeutics

The main advantage of trading using opposite Burning Rock and Nektar Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burning Rock 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 Burning Rock Biotech 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.