Correlation Between Nuvalent and Southland Holdings

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

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

Diversification Opportunities for Nuvalent and Southland Holdings

0.69

Correlation Coefficient

Nuvalent  Southland Holdings

Poor diversification

The 3 months correlation between Nuvalent and Southland is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Southland Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southland Holdings 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 Southland Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southland Holdings has no effect on the direction of Nuvalent i.e., Nuvalent and Southland Holdings go up and down completely randomly.

Pair Corralation between Nuvalent and Southland Holdings

Given the investment horizon of 90 days Nuvalent is expected to under-perform the Southland Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Nuvalent is 1.34 times less risky than Southland Holdings. The stock trades about -0.15 of its potential returns per unit of risk. The Southland Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  296.00  in Southland Holdings on September 21, 2024 and sell it today you would earn a total of  35.00  from holding Southland Holdings or generate 11.82% return on investment over 90 days.

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

Nuvalent  vs.  Southland Holdings

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 weak 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.

Southland Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Southland Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Southland Holdings is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Nuvalent and Southland Holdings

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

The idea behind Nuvalent and Southland Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.