Correlation Between Halozyme Therapeutics and Nuvalent

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

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

Diversification Opportunities for Halozyme Therapeutics and Nuvalent

-0.39

Correlation Coefficient

Halozyme Therapeutics  Nuvalent

Very good diversification

The 3 months correlation between Halozyme and Nuvalent is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Halozyme Therapeutics and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and Halozyme 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 Halozyme Therapeutics are associated (or correlated) with Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of Halozyme Therapeutics i.e., Halozyme Therapeutics and Nuvalent go up and down completely randomly.

Pair Corralation between Halozyme Therapeutics and Nuvalent

Given the investment horizon of 90 days Halozyme Therapeutics is expected to generate 0.56 times more return on investment than Nuvalent. However, Halozyme Therapeutics is 1.78 times less risky than Nuvalent. It trades about 0.33 of its potential returns per unit of risk. Nuvalent is currently generating about -0.03 per unit of risk. If you would invest  4,799  in Halozyme Therapeutics on December 30, 2024 and sell it today you would earn a total of  1,585  from holding Halozyme Therapeutics or generate 33.03% return on investment over 90 days.

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

Halozyme Therapeutics  vs.  Nuvalent

Halozyme Therapeutics

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Halozyme Therapeutics are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating essential indicators, Halozyme Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Nuvalent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Nuvalent is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Halozyme Therapeutics and Nuvalent

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

The idea behind Halozyme Therapeutics and Nuvalent 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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.