Correlation Between Nuvalent and Steven Madden

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

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

Diversification Opportunities for Nuvalent and Steven Madden

0.8

Correlation Coefficient

Nuvalent  Steven Madden

Very poor diversification

The 3 months correlation between Nuvalent and Steven is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Steven Madden in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Steven Madden 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 Steven Madden. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Steven Madden has no effect on the direction of Nuvalent i.e., Nuvalent and Steven Madden go up and down completely randomly.

Pair Corralation between Nuvalent and Steven Madden

Given the investment horizon of 90 days Nuvalent is expected to generate 2.5 times more return on investment than Steven Madden. However, Nuvalent is 2.5 times more volatile than Steven Madden. It trades about 0.07 of its potential returns per unit of risk. Steven Madden is currently generating about 0.01 per unit of risk. If you would invest  8,513  in Nuvalent on August 30, 2024 and sell it today you would earn a total of  1,163  from holding Nuvalent or generate 13.66% return on investment over 90 days.

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

Nuvalent  vs.  Steven Madden

Nuvalent

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvalent are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Nuvalent disclosed solid returns over the last few months and may actually be approaching a breakup point.

Steven Madden

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Steven Madden has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Steven Madden is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Nuvalent and Steven Madden

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

The idea behind Nuvalent and Steven Madden 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.