Correlation Between NRX Pharmaceuticals and 0010EPAF5

Can any of the company-specific risk be diversified away by investing in both NRX Pharmaceuticals and 0010EPAF5 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 NRX Pharmaceuticals and 0010EPAF5 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between NRX Pharmaceuticals and AEP TEX CENT, you can compare the effects of market volatilities on NRX Pharmaceuticals and 0010EPAF5 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 NRX Pharmaceuticals with a short position of 0010EPAF5. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRX Pharmaceuticals and 0010EPAF5.

Diversification Opportunities for NRX Pharmaceuticals and 0010EPAF5

-0.36

Correlation Coefficient

NRX Pharmaceuticals  0010EPAF5

Very good diversification

The 3 months correlation between NRX and 0010EPAF5 is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding NRX Pharmaceuticals and AEP TEX CENT in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AEP TEX CENT and NRX Pharmaceuticals 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 NRX Pharmaceuticals are associated (or correlated) with 0010EPAF5. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AEP TEX CENT has no effect on the direction of NRX Pharmaceuticals i.e., NRX Pharmaceuticals and 0010EPAF5 go up and down completely randomly.

Pair Corralation between NRX Pharmaceuticals and 0010EPAF5

Given the investment horizon of 90 days NRX Pharmaceuticals is expected to generate 18.43 times more return on investment than 0010EPAF5. However, NRX Pharmaceuticals is 18.43 times more volatile than AEP TEX CENT. It trades about 0.39 of its potential returns per unit of risk. AEP TEX CENT is currently generating about -0.12 per unit of risk. If you would invest  121.00  in NRX Pharmaceuticals on October 11, 2024 and sell it today you would earn a total of  255.00  from holding NRX Pharmaceuticals or generate 210.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.71%
Values	Daily Returns

NRX Pharmaceuticals  vs.  AEP TEX CENT

NRX Pharmaceuticals

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NRX Pharmaceuticals are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, NRX Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

AEP TEX CENT

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AEP TEX CENT has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, 0010EPAF5 is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NRX Pharmaceuticals and 0010EPAF5

The main advantage of trading using opposite NRX Pharmaceuticals and 0010EPAF5 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NRX Pharmaceuticals position performs unexpectedly, 0010EPAF5 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 0010EPAF5 will offset losses from the drop in 0010EPAF5's long position.

The idea behind NRX Pharmaceuticals and AEP TEX CENT 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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.