Correlation Between Nuvalent and Alpha Healthcare

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

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

Diversification Opportunities for Nuvalent and Alpha Healthcare

0.24

Correlation Coefficient

Nuvalent  Alpha Healthcare

Modest diversification

The 3 months correlation between Nuvalent and Alpha is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Alpha Healthcare Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Healthcare Acq 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 Alpha Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Healthcare Acq has no effect on the direction of Nuvalent i.e., Nuvalent and Alpha Healthcare go up and down completely randomly.

Pair Corralation between Nuvalent and Alpha Healthcare

Given the investment horizon of 90 days Nuvalent is expected to generate 1.87 times more return on investment than Alpha Healthcare. However, Nuvalent is 1.87 times more volatile than Alpha Healthcare Acquisition. It trades about 0.07 of its potential returns per unit of risk. Alpha Healthcare Acquisition is currently generating about 0.0 per unit of risk. If you would invest  3,088  in Nuvalent on October 11, 2024 and sell it today you would earn a total of  4,737  from holding Nuvalent or generate 153.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	24.65%
Values	Daily Returns

Nuvalent  vs.  Alpha Healthcare Acquisition

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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Alpha Healthcare Acq

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Healthcare Acquisition has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Alpha Healthcare is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nuvalent and Alpha Healthcare

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

The idea behind Nuvalent and Alpha Healthcare Acquisition 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.