Correlation Between NervGen Pharma and Medicenna Therapeutics

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

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

Diversification Opportunities for NervGen Pharma and Medicenna Therapeutics

-0.4

Correlation Coefficient

NervGen Pharma  Medicenna Therapeutics

Very good diversification

The 3 months correlation between NervGen and Medicenna is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding NervGen Pharma Corp and Medicenna Therapeutics Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Medicenna Therapeutics and NervGen 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 NervGen Pharma Corp are associated (or correlated) with Medicenna Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Medicenna Therapeutics has no effect on the direction of NervGen Pharma i.e., NervGen Pharma and Medicenna Therapeutics go up and down completely randomly.

Pair Corralation between NervGen Pharma and Medicenna Therapeutics

Assuming the 90 days trading horizon NervGen Pharma Corp is expected to generate 1.97 times more return on investment than Medicenna Therapeutics. However, NervGen Pharma is 1.97 times more volatile than Medicenna Therapeutics Corp. It trades about 0.17 of its potential returns per unit of risk. Medicenna Therapeutics Corp is currently generating about -0.29 per unit of risk. If you would invest  256.00  in NervGen Pharma Corp on October 9, 2024 and sell it today you would earn a total of  53.00  from holding NervGen Pharma Corp or generate 20.7% return on investment over 90 days.

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

NervGen Pharma Corp  vs.  Medicenna Therapeutics Corp

NervGen Pharma Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NervGen Pharma Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating technical and fundamental indicators, NervGen Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Medicenna Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Medicenna Therapeutics Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NervGen Pharma and Medicenna Therapeutics

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

The idea behind NervGen Pharma Corp and Medicenna Therapeutics Corp 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.