Correlation Between Liquidia Technologies and Nuvalent

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

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

Diversification Opportunities for Liquidia Technologies and Nuvalent

0.04

Correlation Coefficient

Liquidia Technologies  Nuvalent

Significant diversification

The 3 months correlation between Liquidia and Nuvalent is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Liquidia Technologies and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and Liquidia 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 Liquidia Technologies 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 Liquidia Technologies i.e., Liquidia Technologies and Nuvalent go up and down completely randomly.

Pair Corralation between Liquidia Technologies and Nuvalent

Given the investment horizon of 90 days Liquidia Technologies is expected to generate 1.04 times more return on investment than Nuvalent. However, Liquidia Technologies is 1.04 times more volatile than Nuvalent. It trades about 0.18 of its potential returns per unit of risk. Nuvalent is currently generating about -0.03 per unit of risk. If you would invest  1,151  in Liquidia Technologies on December 30, 2024 and sell it today you would earn a total of  358.00  from holding Liquidia Technologies or generate 31.1% return on investment over 90 days.

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

Liquidia Technologies  vs.  Nuvalent

Liquidia Technologies

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Liquidia Technologies are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental indicators, Liquidia Technologies sustained 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 Liquidia Technologies and Nuvalent

The main advantage of trading using opposite Liquidia Technologies and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Liquidia Technologies 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 Liquidia Technologies 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.