Correlation Between NextCure and Champions Oncology

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

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

Diversification Opportunities for NextCure and Champions Oncology

-0.02

Correlation Coefficient

NextCure  Champions Oncology

Good diversification

The 3 months correlation between NextCure and Champions is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and Champions Oncology in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Champions Oncology 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 Champions Oncology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Champions Oncology has no effect on the direction of NextCure i.e., NextCure and Champions Oncology go up and down completely randomly.

Pair Corralation between NextCure and Champions Oncology

Given the investment horizon of 90 days NextCure is expected to under-perform the Champions Oncology. But the stock apears to be less risky and, when comparing its historical volatility, NextCure is 1.25 times less risky than Champions Oncology. The stock trades about -0.09 of its potential returns per unit of risk. The Champions Oncology is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  416.00  in Champions Oncology on September 1, 2024 and sell it today you would earn a total of  36.00  from holding Champions Oncology or generate 8.65% return on investment over 90 days.

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

NextCure  vs.  Champions Oncology

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 December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Champions Oncology

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Champions Oncology are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Champions Oncology reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextCure and Champions Oncology

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

The idea behind NextCure and Champions Oncology 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.