Correlation Between Nuvalent and OKYO Pharma

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

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

Diversification Opportunities for Nuvalent and OKYO Pharma

-0.53

Correlation Coefficient

Nuvalent  OKYO Pharma

Excellent diversification

The 3 months correlation between Nuvalent and OKYO is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and OKYO Pharma Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OKYO Pharma 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 OKYO Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OKYO Pharma has no effect on the direction of Nuvalent i.e., Nuvalent and OKYO Pharma go up and down completely randomly.

Pair Corralation between Nuvalent and OKYO Pharma

Given the investment horizon of 90 days Nuvalent is expected to generate 0.6 times more return on investment than OKYO Pharma. However, Nuvalent is 1.68 times less risky than OKYO Pharma. It trades about 0.05 of its potential returns per unit of risk. OKYO Pharma Ltd is currently generating about -0.01 per unit of risk. If you would invest  6,795  in Nuvalent on September 24, 2024 and sell it today you would earn a total of  1,627  from holding Nuvalent or generate 23.94% return on investment over 90 days.

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

Nuvalent  vs.  OKYO Pharma Ltd

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.

OKYO Pharma

Risk-Adjusted Performance

2 of 100

Weak

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

Pair Trading with Nuvalent and OKYO Pharma

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

The idea behind Nuvalent and OKYO Pharma Ltd 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.