Correlation Between NewAmsterdam Pharma and VistaGen Therapeutics

Can any of the company-specific risk be diversified away by investing in both NewAmsterdam Pharma and VistaGen 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 VistaGen 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 VistaGen Therapeutics, you can compare the effects of market volatilities on NewAmsterdam Pharma and VistaGen 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 VistaGen Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of NewAmsterdam Pharma and VistaGen Therapeutics.

Diversification Opportunities for NewAmsterdam Pharma and VistaGen Therapeutics

0.05

Correlation Coefficient

NewAmsterdam Pharma  VistaGen Therapeutics

Significant diversification

The 3 months correlation between NewAmsterdam and VistaGen is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding NewAmsterdam Pharma and VistaGen Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VistaGen 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 VistaGen Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VistaGen Therapeutics has no effect on the direction of NewAmsterdam Pharma i.e., NewAmsterdam Pharma and VistaGen Therapeutics go up and down completely randomly.

Pair Corralation between NewAmsterdam Pharma and VistaGen Therapeutics

Given the investment horizon of 90 days NewAmsterdam Pharma is expected to under-perform the VistaGen Therapeutics. In addition to that, NewAmsterdam Pharma is 1.28 times more volatile than VistaGen Therapeutics. It trades about -0.3 of its total potential returns per unit of risk. VistaGen Therapeutics is currently generating about -0.02 per unit of volatility. If you would invest  301.00  in VistaGen Therapeutics on November 19, 2024 and sell it today you would lose (4.00) from holding VistaGen Therapeutics or give up 1.33% of portfolio value over 90 days.

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

NewAmsterdam Pharma  vs.  VistaGen Therapeutics

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 latest weak performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

VistaGen Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in VistaGen Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, VistaGen Therapeutics displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NewAmsterdam Pharma and VistaGen Therapeutics

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

The idea behind NewAmsterdam Pharma and VistaGen 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.

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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.