Correlation Between Nuvalent and Oxford Cannabinoid

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

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

Diversification Opportunities for Nuvalent and Oxford Cannabinoid

0.0

Correlation Coefficient

Nuvalent  Oxford Cannabinoid

Pay attention - limited upside

The 3 months correlation between Nuvalent and Oxford is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Oxford Cannabinoid Technologie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oxford Cannabinoid 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 Oxford Cannabinoid. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oxford Cannabinoid has no effect on the direction of Nuvalent i.e., Nuvalent and Oxford Cannabinoid go up and down completely randomly.

Pair Corralation between Nuvalent and Oxford Cannabinoid

Given the investment horizon of 90 days Nuvalent is expected to generate 22.01 times less return on investment than Oxford Cannabinoid. But when comparing it to its historical volatility, Nuvalent is 17.45 times less risky than Oxford Cannabinoid. It trades about 0.05 of its potential returns per unit of risk. Oxford Cannabinoid Technologies is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  0.51  in Oxford Cannabinoid Technologies on September 24, 2024 and sell it today you would lose (0.23) from holding Oxford Cannabinoid Technologies or give up 45.1% of portfolio value over 90 days.

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

Nuvalent  vs.  Oxford Cannabinoid Technologie

Nuvalent

Risk-Adjusted Performance

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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.

Oxford Cannabinoid

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Oxford Cannabinoid Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical indicators, Oxford Cannabinoid is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Nuvalent and Oxford Cannabinoid

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

The idea behind Nuvalent and Oxford Cannabinoid Technologies 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.