Correlation Between Dynavax Technologies and Nektar Therapeutics

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

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

Diversification Opportunities for Dynavax Technologies and Nektar Therapeutics

-0.64

Correlation Coefficient

Dynavax Technologies  Nektar Therapeutics

Excellent diversification

The 3 months correlation between Dynavax and Nektar is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Dynavax Technologies and Nektar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nektar Therapeutics and Dynavax Technologies 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 Dynavax Technologies 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 Dynavax Technologies i.e., Dynavax Technologies and Nektar Therapeutics go up and down completely randomly.

Pair Corralation between Dynavax Technologies and Nektar Therapeutics

Given the investment horizon of 90 days Dynavax Technologies is expected to generate 10.27 times less return on investment than Nektar Therapeutics. But when comparing it to its historical volatility, Dynavax Technologies is 6.29 times less risky than Nektar Therapeutics. It trades about 0.07 of its potential returns per unit of risk. Nektar Therapeutics is currently generating about 0.11 of returns per unit of risk over similar time horizon. 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	Weak
Accuracy	100.0%
Values	Daily Returns

Dynavax Technologies  vs.  Nektar Therapeutics

Dynavax Technologies

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynavax Technologies are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain basic indicators, Dynavax Technologies showed 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 Dynavax Technologies and Nektar Therapeutics

The main advantage of trading using opposite Dynavax Technologies and Nektar Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynavax Technologies 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 Dynavax Technologies 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.