Correlation Between NRx Pharmaceuticals and Fate Therapeutics

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

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

Diversification Opportunities for NRx Pharmaceuticals and Fate Therapeutics

-0.32

Correlation Coefficient

NRx Pharmaceuticals  Fate Therapeutics

Very good diversification

The 3 months correlation between NRx and Fate is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding NRx Pharmaceuticals and Fate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fate Therapeutics 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 Fate Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fate Therapeutics has no effect on the direction of NRx Pharmaceuticals i.e., NRx Pharmaceuticals and Fate Therapeutics go up and down completely randomly.

Pair Corralation between NRx Pharmaceuticals and Fate Therapeutics

Assuming the 90 days horizon NRx Pharmaceuticals is expected to generate 10.8 times more return on investment than Fate Therapeutics. However, NRx Pharmaceuticals is 10.8 times more volatile than Fate Therapeutics. It trades about 0.08 of its potential returns per unit of risk. Fate Therapeutics is currently generating about 0.02 per unit of risk. If you would invest  8.00  in NRx Pharmaceuticals on September 26, 2024 and sell it today you would lose (1.00) from holding NRx Pharmaceuticals or give up 12.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	86.17%
Values	Daily Returns

NRx Pharmaceuticals  vs.  Fate Therapeutics

NRx Pharmaceuticals

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NRx Pharmaceuticals are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, NRx Pharmaceuticals showed solid returns over the last few months and may actually be approaching a breakup point.

Fate Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fate Therapeutics 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with NRx Pharmaceuticals and Fate Therapeutics

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

The idea behind NRx Pharmaceuticals and Fate Therapeutics 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.