Correlation Between NextCure and Eledon Pharmaceuticals

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

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

Diversification Opportunities for NextCure and Eledon Pharmaceuticals

0.66

Correlation Coefficient

NextCure  Eledon Pharmaceuticals

Poor diversification

The 3 months correlation between NextCure and Eledon is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and Eledon Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eledon 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 Eledon Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eledon Pharmaceuticals has no effect on the direction of NextCure i.e., NextCure and Eledon Pharmaceuticals go up and down completely randomly.

Pair Corralation between NextCure and Eledon Pharmaceuticals

Given the investment horizon of 90 days NextCure is expected to under-perform the Eledon Pharmaceuticals. In addition to that, NextCure is 1.24 times more volatile than Eledon Pharmaceuticals. It trades about -0.15 of its total potential returns per unit of risk. Eledon Pharmaceuticals is currently generating about -0.08 per unit of volatility. If you would invest  414.00  in Eledon Pharmaceuticals on December 28, 2024 and sell it today you would lose (79.00) from holding Eledon Pharmaceuticals or give up 19.08% of portfolio value over 90 days.

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

NextCure  vs.  Eledon Pharmaceuticals

NextCure

Risk-Adjusted Performance

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 April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Eledon Pharmaceuticals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Eledon Pharmaceuticals 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 fundamental indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with NextCure and Eledon Pharmaceuticals

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

The idea behind NextCure and Eledon Pharmaceuticals 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.