Correlation Between Nuvalent and Sellas Life

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

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

Diversification Opportunities for Nuvalent and Sellas Life

0.05

Correlation Coefficient

Nuvalent  Sellas Life

Significant diversification

The 3 months correlation between Nuvalent and Sellas is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Sellas Life Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sellas Life Sciences 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 Sellas Life. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sellas Life Sciences has no effect on the direction of Nuvalent i.e., Nuvalent and Sellas Life go up and down completely randomly.

Pair Corralation between Nuvalent and Sellas Life

Given the investment horizon of 90 days Nuvalent is expected to under-perform the Sellas Life. But the stock apears to be less risky and, when comparing its historical volatility, Nuvalent is 2.94 times less risky than Sellas Life. The stock trades about -0.04 of its potential returns per unit of risk. The Sellas Life Sciences is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  89.00  in Sellas Life Sciences on December 20, 2024 and sell it today you would earn a total of  32.00  from holding Sellas Life Sciences or generate 35.96% return on investment over 90 days.

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

Nuvalent  vs.  Sellas Life Sciences

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 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.

Sellas Life Sciences

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sellas Life Sciences are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak essential indicators, Sellas Life unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuvalent and Sellas Life

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

The idea behind Nuvalent and Sellas Life Sciences 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.