Correlation Between Design Therapeutics and Nuvation Bio

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

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

Diversification Opportunities for Design Therapeutics and Nuvation Bio

0.78

Correlation Coefficient

Design Therapeutics  Nuvation Bio

Poor diversification

The 3 months correlation between Design and Nuvation is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Design Therapeutics and Nuvation Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvation Bio and Design 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 Design Therapeutics are associated (or correlated) with Nuvation Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvation Bio has no effect on the direction of Design Therapeutics i.e., Design Therapeutics and Nuvation Bio go up and down completely randomly.

Pair Corralation between Design Therapeutics and Nuvation Bio

Given the investment horizon of 90 days Design Therapeutics is expected to generate 1.99 times more return on investment than Nuvation Bio. However, Design Therapeutics is 1.99 times more volatile than Nuvation Bio. It trades about 0.12 of its potential returns per unit of risk. Nuvation Bio is currently generating about -0.12 per unit of risk. If you would invest  562.00  in Design Therapeutics on September 24, 2024 and sell it today you would earn a total of  63.00  from holding Design Therapeutics or generate 11.21% return on investment over 90 days.

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

Design Therapeutics  vs.  Nuvation Bio

Design Therapeutics

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Design Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady technical and fundamental indicators, Design Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Nuvation Bio

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvation Bio are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nuvation Bio may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Design Therapeutics and Nuvation Bio

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

The idea behind Design Therapeutics and Nuvation Bio 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.