Correlation Between NextCure and Larimar Therapeutics

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

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

Diversification Opportunities for NextCure and Larimar Therapeutics

0.87

Correlation Coefficient

NextCure  Larimar Therapeutics

Very poor diversification

The 3 months correlation between NextCure and Larimar is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and Larimar Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Larimar Therapeutics 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 Larimar Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Larimar Therapeutics has no effect on the direction of NextCure i.e., NextCure and Larimar Therapeutics go up and down completely randomly.

Pair Corralation between NextCure and Larimar Therapeutics

Given the investment horizon of 90 days NextCure is expected to under-perform the Larimar Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, NextCure is 1.07 times less risky than Larimar Therapeutics. The stock trades about -0.17 of its potential returns per unit of risk. The Larimar Therapeutics is currently generating about -0.15 of returns per unit of risk over similar time horizon. If you would invest  391.00  in Larimar Therapeutics on December 29, 2024 and sell it today you would lose (156.00) from holding Larimar Therapeutics or give up 39.9% of portfolio value over 90 days.

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

NextCure  vs.  Larimar Therapeutics

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.

Larimar Therapeutics

Risk-Adjusted Performance

Very Weak

Over the last 90 days Larimar Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's primary indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with NextCure and Larimar Therapeutics

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

The idea behind NextCure and Larimar Therapeutics 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.