Correlation Between Nuvalent and Lion One

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

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

Diversification Opportunities for Nuvalent and Lion One

0.65

Correlation Coefficient

Nuvalent  Lion One

Poor diversification

The 3 months correlation between Nuvalent and Lion is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Lion One Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lion One Metals 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 Lion One. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lion One Metals has no effect on the direction of Nuvalent i.e., Nuvalent and Lion One go up and down completely randomly.

Pair Corralation between Nuvalent and Lion One

Given the investment horizon of 90 days Nuvalent is expected to under-perform the Lion One. But the stock apears to be less risky and, when comparing its historical volatility, Nuvalent is 1.62 times less risky than Lion One. The stock trades about -0.35 of its potential returns per unit of risk. The Lion One Metals is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  19.00  in Lion One Metals on October 12, 2024 and sell it today you would earn a total of  2.00  from holding Lion One Metals or generate 10.53% return on investment over 90 days.

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

Nuvalent  vs.  Lion One Metals

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.

Lion One Metals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lion One Metals 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 essential indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Nuvalent and Lion One

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

The idea behind Nuvalent and Lion One Metals 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.