Correlation Between Nuvalent and Analog Devices

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

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

Diversification Opportunities for Nuvalent and Analog Devices

0.57

Correlation Coefficient

Nuvalent  Analog Devices

Very weak diversification

The 3 months correlation between Nuvalent and Analog is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices and Nuvalent 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 Nuvalent are associated (or correlated) with Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of Nuvalent i.e., Nuvalent and Analog Devices go up and down completely randomly.

Pair Corralation between Nuvalent and Analog Devices

Given the investment horizon of 90 days Nuvalent is expected to generate 2.02 times more return on investment than Analog Devices. However, Nuvalent is 2.02 times more volatile than Analog Devices. It trades about 0.07 of its potential returns per unit of risk. Analog Devices is currently generating about 0.04 per unit of risk. If you would invest  2,978  in Nuvalent on September 20, 2024 and sell it today you would earn a total of  5,480  from holding Nuvalent or generate 184.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

Nuvalent  vs.  Analog Devices

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Nuvalent and Analog Devices

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

The idea behind Nuvalent and Analog Devices 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.