Correlation Between Nuvalent and Willamette Valley

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

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

Diversification Opportunities for Nuvalent and Willamette Valley

0.37

Correlation Coefficient

Nuvalent  Willamette Valley

Weak diversification

The 3 months correlation between Nuvalent and Willamette is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Willamette Valley Vineyards in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Willamette Valley 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 Willamette Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Willamette Valley has no effect on the direction of Nuvalent i.e., Nuvalent and Willamette Valley go up and down completely randomly.

Pair Corralation between Nuvalent and Willamette Valley

Given the investment horizon of 90 days Nuvalent is expected to under-perform the Willamette Valley. In addition to that, Nuvalent is 1.08 times more volatile than Willamette Valley Vineyards. It trades about -0.31 of its total potential returns per unit of risk. Willamette Valley Vineyards is currently generating about -0.03 per unit of volatility. If you would invest  350.00  in Willamette Valley Vineyards on October 10, 2024 and sell it today you would lose (6.00) from holding Willamette Valley Vineyards or give up 1.71% of portfolio value over 90 days.

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

Nuvalent  vs.  Willamette Valley Vineyards

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 February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Willamette Valley

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Willamette Valley Vineyards has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward indicators, Willamette Valley is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Nuvalent and Willamette Valley

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

The idea behind Nuvalent and Willamette Valley Vineyards 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.