Correlation Between Nuvalent and Ikena Oncology

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

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

Diversification Opportunities for Nuvalent and Ikena Oncology

0.39

Correlation Coefficient

Nuvalent  Ikena Oncology

Weak diversification

The 3 months correlation between Nuvalent and Ikena is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Ikena Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ikena Oncology 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 Ikena Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ikena Oncology has no effect on the direction of Nuvalent i.e., Nuvalent and Ikena Oncology go up and down completely randomly.

Pair Corralation between Nuvalent and Ikena Oncology

Given the investment horizon of 90 days Nuvalent is expected to generate 1.15 times more return on investment than Ikena Oncology. However, Nuvalent is 1.15 times more volatile than Ikena Oncology. It trades about -0.02 of its potential returns per unit of risk. Ikena Oncology is currently generating about -0.12 per unit of risk. If you would invest  7,787  in Nuvalent on December 29, 2024 and sell it today you would lose (425.00) from holding Nuvalent or give up 5.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Nuvalent  vs.  Ikena Oncology

Nuvalent

Risk-Adjusted Performance

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Nuvalent is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Ikena Oncology

Risk-Adjusted Performance

Very Weak

Over the last 90 days Ikena Oncology 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 somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Nuvalent and Ikena Oncology

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

The idea behind Nuvalent and Ikena Oncology 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..