Correlation Between NewAmsterdam Pharma and Atea Pharmaceuticals

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

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

Diversification Opportunities for NewAmsterdam Pharma and Atea Pharmaceuticals

0.21

Correlation Coefficient

NewAmsterdam Pharma  Atea Pharmaceuticals

Modest diversification

The 3 months correlation between NewAmsterdam and Atea is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding NewAmsterdam Pharma and Atea Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atea Pharmaceuticals and NewAmsterdam 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 NewAmsterdam Pharma are associated (or correlated) with Atea Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atea Pharmaceuticals has no effect on the direction of NewAmsterdam Pharma i.e., NewAmsterdam Pharma and Atea Pharmaceuticals go up and down completely randomly.

Pair Corralation between NewAmsterdam Pharma and Atea Pharmaceuticals

Given the investment horizon of 90 days NewAmsterdam Pharma is expected to generate 2.22 times more return on investment than Atea Pharmaceuticals. However, NewAmsterdam Pharma is 2.22 times more volatile than Atea Pharmaceuticals. It trades about 0.0 of its potential returns per unit of risk. Atea Pharmaceuticals is currently generating about -0.04 per unit of risk. If you would invest  1,985  in NewAmsterdam Pharma on November 28, 2024 and sell it today you would lose (197.00) from holding NewAmsterdam Pharma or give up 9.92% of portfolio value over 90 days.

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

NewAmsterdam Pharma  vs.  Atea Pharmaceuticals

NewAmsterdam Pharma

Risk-Adjusted Performance

Very Weak

Over the last 90 days NewAmsterdam Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable primary indicators, NewAmsterdam Pharma is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Atea Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Atea Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest weak performance, the Stock's forward 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 NewAmsterdam Pharma and Atea Pharmaceuticals

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

The idea behind NewAmsterdam Pharma and Atea Pharmaceuticals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.