Correlation Between NewAmsterdam Pharma and RAPT Therapeutics

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

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

Diversification Opportunities for NewAmsterdam Pharma and RAPT Therapeutics

-0.27

Correlation Coefficient

NewAmsterdam Pharma  RAPT Therapeutics

Very good diversification

The 3 months correlation between NewAmsterdam and RAPT is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding NewAmsterdam Pharma and RAPT Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RAPT Therapeutics 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 RAPT Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RAPT Therapeutics has no effect on the direction of NewAmsterdam Pharma i.e., NewAmsterdam Pharma and RAPT Therapeutics go up and down completely randomly.

Pair Corralation between NewAmsterdam Pharma and RAPT Therapeutics

Given the investment horizon of 90 days NewAmsterdam Pharma is expected to under-perform the RAPT Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, NewAmsterdam Pharma is 17.98 times less risky than RAPT Therapeutics. The stock trades about -0.27 of its potential returns per unit of risk. The RAPT Therapeutics is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  81.00  in RAPT Therapeutics on October 20, 2024 and sell it today you would earn a total of  39.00  from holding RAPT Therapeutics or generate 48.15% return on investment over 90 days.

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

NewAmsterdam Pharma  vs.  RAPT Therapeutics

NewAmsterdam Pharma

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, NewAmsterdam Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

RAPT Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RAPT Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, RAPT Therapeutics unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NewAmsterdam Pharma and RAPT Therapeutics

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

The idea behind NewAmsterdam Pharma and RAPT Therapeutics 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.