Correlation Between NRx Pharmaceuticals and Equillium

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

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

Diversification Opportunities for NRx Pharmaceuticals and Equillium

-0.2

Correlation Coefficient

NRx Pharmaceuticals  Equillium

Good diversification

The 3 months correlation between NRx and Equillium is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding NRx Pharmaceuticals and Equillium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Equillium 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 Equillium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Equillium has no effect on the direction of NRx Pharmaceuticals i.e., NRx Pharmaceuticals and Equillium go up and down completely randomly.

Pair Corralation between NRx Pharmaceuticals and Equillium

Assuming the 90 days horizon NRx Pharmaceuticals is expected to generate 6.37 times more return on investment than Equillium. However, NRx Pharmaceuticals is 6.37 times more volatile than Equillium. It trades about 0.43 of its potential returns per unit of risk. Equillium is currently generating about 0.1 per unit of risk. If you would invest  6.59  in NRx Pharmaceuticals on October 7, 2024 and sell it today you would earn a total of  28.41  from holding NRx Pharmaceuticals or generate 431.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

NRx Pharmaceuticals  vs.  Equillium

NRx Pharmaceuticals

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NRx Pharmaceuticals are ranked lower than 21 (%) 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.

Equillium

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Equillium has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Equillium is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NRx Pharmaceuticals and Equillium

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

The idea behind NRx Pharmaceuticals and Equillium 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.

Check out your portfolio center.

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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.