Correlation Between Nkarta and Olema Pharmaceuticals

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

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

Diversification Opportunities for Nkarta and Olema Pharmaceuticals

0.64

Correlation Coefficient

Nkarta  Olema Pharmaceuticals

Poor diversification

The 3 months correlation between Nkarta and Olema is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Nkarta Inc and Olema Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Olema Pharmaceuticals and Nkarta 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 Nkarta Inc are associated (or correlated) with Olema Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Olema Pharmaceuticals has no effect on the direction of Nkarta i.e., Nkarta and Olema Pharmaceuticals go up and down completely randomly.

Pair Corralation between Nkarta and Olema Pharmaceuticals

Given the investment horizon of 90 days Nkarta Inc is expected to under-perform the Olema Pharmaceuticals. In addition to that, Nkarta is 1.17 times more volatile than Olema Pharmaceuticals. It trades about -0.1 of its total potential returns per unit of risk. Olema Pharmaceuticals is currently generating about 0.0 per unit of volatility. If you would invest  1,176  in Olema Pharmaceuticals on August 30, 2024 and sell it today you would lose (164.00) from holding Olema Pharmaceuticals or give up 13.95% of portfolio value over 90 days.

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

Nkarta Inc  vs.  Olema Pharmaceuticals

Nkarta Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nkarta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Olema Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Olema Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's primary indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Nkarta and Olema Pharmaceuticals

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

The idea behind Nkarta Inc and Olema Pharmaceuticals 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.