Correlation Between NRx Pharmaceuticals and Cue Biopharma

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

By analyzing existing cross correlation between NRx Pharmaceuticals and Cue Biopharma, you can compare the effects of market volatilities on NRx Pharmaceuticals and Cue Biopharma 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 Cue Biopharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of NRx Pharmaceuticals and Cue Biopharma.

Diversification Opportunities for NRx Pharmaceuticals and Cue Biopharma

0.5

Correlation Coefficient

NRx Pharmaceuticals  Cue Biopharma

Very weak diversification

The 3 months correlation between NRx and Cue is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding NRx Pharmaceuticals and Cue Biopharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cue Biopharma 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 Cue Biopharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cue Biopharma has no effect on the direction of NRx Pharmaceuticals i.e., NRx Pharmaceuticals and Cue Biopharma go up and down completely randomly.

Pair Corralation between NRx Pharmaceuticals and Cue Biopharma

Assuming the 90 days horizon NRx Pharmaceuticals is expected to generate 3.01 times more return on investment than Cue Biopharma. However, NRx Pharmaceuticals is 3.01 times more volatile than Cue Biopharma. It trades about 0.07 of its potential returns per unit of risk. Cue Biopharma is currently generating about 0.01 per unit of risk. If you would invest  10.00  in NRx Pharmaceuticals on December 26, 2024 and sell it today you would lose (2.37) from holding NRx Pharmaceuticals or give up 23.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	93.44%
Values	Daily Returns

NRx Pharmaceuticals  vs.  Cue Biopharma

NRx Pharmaceuticals

Risk-Adjusted Performance

Modest

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

Cue Biopharma

Risk-Adjusted Performance

Weak

Over the last 90 days Cue Biopharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cue Biopharma 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 Cue Biopharma

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

The idea behind NRx Pharmaceuticals and Cue Biopharma 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.