Correlation Between Champions Oncology and NextCure

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

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

Diversification Opportunities for Champions Oncology and NextCure

-0.02

Correlation Coefficient

Champions Oncology  NextCure

Good diversification

The 3 months correlation between Champions and NextCure is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Champions Oncology and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Champions Oncology 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 Champions Oncology are associated (or correlated) with NextCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextCure has no effect on the direction of Champions Oncology i.e., Champions Oncology and NextCure go up and down completely randomly.

Pair Corralation between Champions Oncology and NextCure

Given the investment horizon of 90 days Champions Oncology is expected to generate 0.84 times more return on investment than NextCure. However, Champions Oncology is 1.2 times less risky than NextCure. It trades about 0.21 of its potential returns per unit of risk. NextCure is currently generating about -0.12 per unit of risk. If you would invest  391.00  in Champions Oncology on September 1, 2024 and sell it today you would earn a total of  61.00  from holding Champions Oncology or generate 15.6% return on investment over 90 days.

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

Champions Oncology  vs.  NextCure

Champions Oncology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Champions Oncology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Champions Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

NextCure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextCure 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 December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Champions Oncology and NextCure

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

The idea behind Champions Oncology and NextCure 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.