Correlation Between Nuvalent and Pharming Group

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

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

Diversification Opportunities for Nuvalent and Pharming Group

-0.34

Correlation Coefficient

Nuvalent  Pharming Group

Very good diversification

The 3 months correlation between Nuvalent and Pharming is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Pharming Group NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pharming Group NV 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 Pharming Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pharming Group NV has no effect on the direction of Nuvalent i.e., Nuvalent and Pharming Group go up and down completely randomly.

Pair Corralation between Nuvalent and Pharming Group

Given the investment horizon of 90 days Nuvalent is expected to generate 1.41 times more return on investment than Pharming Group. However, Nuvalent is 1.41 times more volatile than Pharming Group NV. It trades about 0.05 of its potential returns per unit of risk. Pharming Group NV is currently generating about -0.02 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	Insignificant
Accuracy	100.0%
Values	Daily Returns

Nuvalent  vs.  Pharming Group NV

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.

Pharming Group NV

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pharming Group NV are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Pharming Group may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Nuvalent and Pharming Group

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

The idea behind Nuvalent and Pharming Group NV 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.