Correlation Between ESSA Pharma and Nuvation Bio

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

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

Diversification Opportunities for ESSA Pharma and Nuvation Bio

-0.74

Correlation Coefficient

ESSA Pharma  Nuvation Bio

Pay attention - limited upside

The 3 months correlation between ESSA and Nuvation is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding ESSA Pharma and Nuvation Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvation Bio and ESSA Pharma 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 ESSA Pharma 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 ESSA Pharma i.e., ESSA Pharma and Nuvation Bio go up and down completely randomly.

Pair Corralation between ESSA Pharma and Nuvation Bio

Given the investment horizon of 90 days ESSA Pharma is expected to generate 3.36 times less return on investment than Nuvation Bio. But when comparing it to its historical volatility, ESSA Pharma is 1.91 times less risky than Nuvation Bio. It trades about 0.08 of its potential returns per unit of risk. Nuvation Bio is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  268.00  in Nuvation Bio on October 12, 2024 and sell it today you would earn a total of  33.00  from holding Nuvation Bio or generate 12.31% return on investment over 90 days.

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

ESSA Pharma  vs.  Nuvation Bio

ESSA Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSA Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nuvation Bio

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvation Bio are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nuvation Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ESSA Pharma and Nuvation Bio

The main advantage of trading using opposite ESSA Pharma and Nuvation Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ESSA Pharma 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 ESSA Pharma 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.

Check out your portfolio center.

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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.