Correlation Between Nuvalent and Chiba Bank

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

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

Diversification Opportunities for Nuvalent and Chiba Bank

0.35

Correlation Coefficient

Nuvalent  Chiba Bank

Weak diversification

The 3 months correlation between Nuvalent and Chiba is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Chiba Bank Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chiba Bank 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 Chiba Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chiba Bank has no effect on the direction of Nuvalent i.e., Nuvalent and Chiba Bank go up and down completely randomly.

Pair Corralation between Nuvalent and Chiba Bank

Given the investment horizon of 90 days Nuvalent is expected to generate 1.2 times more return on investment than Chiba Bank. However, Nuvalent is 1.2 times more volatile than Chiba Bank Ltd. It trades about 0.07 of its potential returns per unit of risk. Chiba Bank Ltd is currently generating about 0.02 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	100.0%
Values	Daily Returns

Nuvalent  vs.  Chiba Bank Ltd

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.

Chiba Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Chiba Bank Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chiba Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Nuvalent and Chiba Bank

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

The idea behind Nuvalent and Chiba Bank Ltd 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.