Correlation Between Celldex Therapeutics and Northwest Biotherapeutics

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

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

Diversification Opportunities for Celldex Therapeutics and Northwest Biotherapeutics

0.72

Correlation Coefficient

Celldex Therapeutics  Northwest Biotherapeutics

Poor diversification

The 3 months correlation between Celldex and Northwest is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Celldex Therapeutics and Northwest Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northwest Biotherapeutics and Celldex 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 Celldex Therapeutics are associated (or correlated) with Northwest Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northwest Biotherapeutics has no effect on the direction of Celldex Therapeutics i.e., Celldex Therapeutics and Northwest Biotherapeutics go up and down completely randomly.

Pair Corralation between Celldex Therapeutics and Northwest Biotherapeutics

Given the investment horizon of 90 days Celldex Therapeutics is expected to under-perform the Northwest Biotherapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Celldex Therapeutics is 1.1 times less risky than Northwest Biotherapeutics. The stock trades about -0.17 of its potential returns per unit of risk. The Northwest Biotherapeutics is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  31.00  in Northwest Biotherapeutics on September 17, 2024 and sell it today you would lose (3.00) from holding Northwest Biotherapeutics or give up 9.68% of portfolio value over 90 days.

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

Celldex Therapeutics  vs.  Northwest Biotherapeutics

Celldex Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Celldex 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 fundamental indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Northwest Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Northwest Biotherapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental drivers, Northwest Biotherapeutics is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Celldex Therapeutics and Northwest Biotherapeutics

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

The idea behind Celldex Therapeutics and Northwest Biotherapeutics 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .