Correlation Between NewAmsterdam Pharma and ECARX Holdings

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

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

Diversification Opportunities for NewAmsterdam Pharma and ECARX Holdings

-0.13

Correlation Coefficient

NewAmsterdam Pharma  ECARX Holdings

Good diversification

The 3 months correlation between NewAmsterdam and ECARX is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding NewAmsterdam Pharma and ECARX Holdings Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ECARX Holdings Class 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 ECARX Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ECARX Holdings Class has no effect on the direction of NewAmsterdam Pharma i.e., NewAmsterdam Pharma and ECARX Holdings go up and down completely randomly.

Pair Corralation between NewAmsterdam Pharma and ECARX Holdings

Assuming the 90 days horizon NewAmsterdam Pharma is expected to generate 2.7 times more return on investment than ECARX Holdings. However, NewAmsterdam Pharma is 2.7 times more volatile than ECARX Holdings Class. It trades about 0.07 of its potential returns per unit of risk. ECARX Holdings Class is currently generating about 0.07 per unit of risk. If you would invest  850.00  in NewAmsterdam Pharma on December 1, 2024 and sell it today you would earn a total of  210.00  from holding NewAmsterdam Pharma or generate 24.71% 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.  ECARX Holdings Class

NewAmsterdam Pharma

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating basic indicators, NewAmsterdam Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

ECARX Holdings Class

Risk-Adjusted Performance

Modest

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

Pair Trading with NewAmsterdam Pharma and ECARX Holdings

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

The idea behind NewAmsterdam Pharma and ECARX Holdings Class 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.