Correlation Between NextCure and Centessa Pharmaceuticals

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

By analyzing existing cross correlation between NextCure and Centessa Pharmaceuticals PLC, you can compare the effects of market volatilities on NextCure and Centessa Pharmaceuticals 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 NextCure with a short position of Centessa Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of NextCure and Centessa Pharmaceuticals.

Diversification Opportunities for NextCure and Centessa Pharmaceuticals

-0.48

Correlation Coefficient

NextCure  Centessa Pharmaceuticals

Very good diversification

The 3 months correlation between NextCure and Centessa is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and Centessa Pharmaceuticals PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Centessa Pharmaceuticals and NextCure 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 NextCure are associated (or correlated) with Centessa Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Centessa Pharmaceuticals has no effect on the direction of NextCure i.e., NextCure and Centessa Pharmaceuticals go up and down completely randomly.

Pair Corralation between NextCure and Centessa Pharmaceuticals

Given the investment horizon of 90 days NextCure is expected to under-perform the Centessa Pharmaceuticals. In addition to that, NextCure is 1.18 times more volatile than Centessa Pharmaceuticals PLC. It trades about -0.23 of its total potential returns per unit of risk. Centessa Pharmaceuticals PLC is currently generating about 0.06 per unit of volatility. If you would invest  1,599  in Centessa Pharmaceuticals PLC on October 7, 2024 and sell it today you would earn a total of  102.00  from holding Centessa Pharmaceuticals PLC or generate 6.38% return on investment over 90 days.

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

NextCure  vs.  Centessa Pharmaceuticals PLC

NextCure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextCure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Centessa Pharmaceuticals

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Centessa Pharmaceuticals PLC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Centessa Pharmaceuticals sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextCure and Centessa Pharmaceuticals

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

The idea behind NextCure and Centessa Pharmaceuticals PLC 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.

Check out your portfolio center.

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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.