Correlation Between Larimar Therapeutics and Novavax

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

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

Diversification Opportunities for Larimar Therapeutics and Novavax

-0.12

Correlation Coefficient

Larimar Therapeutics  Novavax

Good diversification

The 3 months correlation between Larimar and Novavax is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Larimar Therapeutics and Novavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Novavax and Larimar 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 Larimar Therapeutics are associated (or correlated) with Novavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Novavax has no effect on the direction of Larimar Therapeutics i.e., Larimar Therapeutics and Novavax go up and down completely randomly.

Pair Corralation between Larimar Therapeutics and Novavax

Given the investment horizon of 90 days Larimar Therapeutics is expected to generate 1.04 times less return on investment than Novavax. But when comparing it to its historical volatility, Larimar Therapeutics is 1.38 times less risky than Novavax. It trades about 0.04 of its potential returns per unit of risk. Novavax is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  886.00  in Novavax on September 16, 2024 and sell it today you would earn a total of  25.00  from holding Novavax or generate 2.82% return on investment over 90 days.

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

Larimar Therapeutics  vs.  Novavax

Larimar Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Larimar Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Larimar Therapeutics is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Novavax

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Larimar Therapeutics and Novavax

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

The idea behind Larimar Therapeutics and Novavax 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.