Correlation Between Nuvalent and Grocery Outlet

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

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

Diversification Opportunities for Nuvalent and Grocery Outlet

-0.16

Correlation Coefficient

Nuvalent  Grocery Outlet

Good diversification

The 3 months correlation between Nuvalent and Grocery is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Grocery Outlet Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grocery Outlet Holding 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 Grocery Outlet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grocery Outlet Holding has no effect on the direction of Nuvalent i.e., Nuvalent and Grocery Outlet go up and down completely randomly.

Pair Corralation between Nuvalent and Grocery Outlet

Given the investment horizon of 90 days Nuvalent is expected to generate 1.12 times more return on investment than Grocery Outlet. However, Nuvalent is 1.12 times more volatile than Grocery Outlet Holding. It trades about 0.06 of its potential returns per unit of risk. Grocery Outlet Holding is currently generating about -0.04 per unit of risk. If you would invest  6,708  in Nuvalent on September 24, 2024 and sell it today you would earn a total of  1,616  from holding Nuvalent or generate 24.09% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nuvalent  vs.  Grocery Outlet Holding

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 unsteady 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.

Grocery Outlet Holding

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Grocery Outlet Holding are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Grocery Outlet may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nuvalent and Grocery Outlet

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

The idea behind Nuvalent and Grocery Outlet Holding 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.