Correlation Between Nuvalent and Investec

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

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

Diversification Opportunities for Nuvalent and Investec

-0.38

Correlation Coefficient

Nuvalent  Investec

Very good diversification

The 3 months correlation between Nuvalent and Investec is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Investec Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investec Group 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 Investec. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investec Group has no effect on the direction of Nuvalent i.e., Nuvalent and Investec go up and down completely randomly.

Pair Corralation between Nuvalent and Investec

Given the investment horizon of 90 days Nuvalent is expected to under-perform the Investec. But the stock apears to be less risky and, when comparing its historical volatility, Nuvalent is 2.29 times less risky than Investec. The stock trades about -0.03 of its potential returns per unit of risk. The Investec Group is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,104  in Investec Group on December 22, 2024 and sell it today you would earn a total of  516.00  from holding Investec Group or generate 46.74% return on investment over 90 days.

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

Nuvalent  vs.  Investec Group

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.

Investec Group

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investec Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Investec showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuvalent and Investec

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

The idea behind Nuvalent and Investec Group 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.