Correlation Between Nuvalent and Vaxcyte

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

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

Diversification Opportunities for Nuvalent and Vaxcyte

0.83

Correlation Coefficient

Nuvalent  Vaxcyte

Very poor diversification

The 3 months correlation between Nuvalent and Vaxcyte is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Vaxcyte in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vaxcyte 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 Vaxcyte. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vaxcyte has no effect on the direction of Nuvalent i.e., Nuvalent and Vaxcyte go up and down completely randomly.

Pair Corralation between Nuvalent and Vaxcyte

Given the investment horizon of 90 days Nuvalent is expected to generate 0.8 times more return on investment than Vaxcyte. However, Nuvalent is 1.24 times less risky than Vaxcyte. It trades about -0.03 of its potential returns per unit of risk. Vaxcyte is currently generating about -0.07 per unit of risk. If you would invest  7,787  in Nuvalent on December 30, 2024 and sell it today you would lose (482.00) from holding Nuvalent or give up 6.19% of portfolio value over 90 days.

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

Nuvalent  vs.  Vaxcyte

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.

Vaxcyte

Risk-Adjusted Performance

Very Weak

Over the last 90 days Vaxcyte has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly 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 Vaxcyte

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

The idea behind Nuvalent and Vaxcyte 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.