Correlation Between NuCana PLC and Sage Therapeutic

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

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

Diversification Opportunities for NuCana PLC and Sage Therapeutic

-0.78

Correlation Coefficient

NuCana PLC  Sage Therapeutic

Pay attention - limited upside

The 3 months correlation between NuCana and Sage is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding NuCana PLC and Sage Therapeutic in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sage Therapeutic and NuCana PLC 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 NuCana PLC are associated (or correlated) with Sage Therapeutic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sage Therapeutic has no effect on the direction of NuCana PLC i.e., NuCana PLC and Sage Therapeutic go up and down completely randomly.

Pair Corralation between NuCana PLC and Sage Therapeutic

Given the investment horizon of 90 days NuCana PLC is expected to under-perform the Sage Therapeutic. But the stock apears to be less risky and, when comparing its historical volatility, NuCana PLC is 1.05 times less risky than Sage Therapeutic. The stock trades about -0.16 of its potential returns per unit of risk. The Sage Therapeutic is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  543.00  in Sage Therapeutic on December 28, 2024 and sell it today you would earn a total of  323.00  from holding Sage Therapeutic or generate 59.48% return on investment over 90 days.

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

NuCana PLC  vs.  Sage Therapeutic

NuCana PLC

Risk-Adjusted Performance

Very Weak

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

Sage Therapeutic

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sage Therapeutic are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Sage Therapeutic exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NuCana PLC and Sage Therapeutic

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

The idea behind NuCana PLC and Sage Therapeutic 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.