Correlation Between Nuvalent and Sea

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

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

Diversification Opportunities for Nuvalent and Sea

-0.26

Correlation Coefficient

Nuvalent  Sea

Very good diversification

The 3 months correlation between Nuvalent and Sea is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Sea in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sea 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 Sea. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sea has no effect on the direction of Nuvalent i.e., Nuvalent and Sea go up and down completely randomly.

Pair Corralation between Nuvalent and Sea

Given the investment horizon of 90 days Nuvalent is expected to generate 1.09 times more return on investment than Sea. However, Nuvalent is 1.09 times more volatile than Sea. It trades about 0.07 of its potential returns per unit of risk. Sea is currently generating about 0.05 per unit of risk. If you would invest  3,007  in Nuvalent on October 25, 2024 and sell it today you would earn a total of  5,363  from holding Nuvalent or generate 178.35% return on investment over 90 days.

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

Nuvalent  vs.  Sea

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 latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Sea

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sea are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady technical and fundamental indicators, Sea exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuvalent and Sea

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

The idea behind Nuvalent and Sea 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.