Correlation Between NextCure and Revelation Biosciences

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

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

Diversification Opportunities for NextCure and Revelation Biosciences

0.38

Correlation Coefficient

NextCure  Revelation Biosciences

Weak diversification

The 3 months correlation between NextCure and Revelation is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and Revelation Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Revelation Biosciences 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 Revelation Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Revelation Biosciences has no effect on the direction of NextCure i.e., NextCure and Revelation Biosciences go up and down completely randomly.

Pair Corralation between NextCure and Revelation Biosciences

Given the investment horizon of 90 days NextCure is expected to under-perform the Revelation Biosciences. But the stock apears to be less risky and, when comparing its historical volatility, NextCure is 4.49 times less risky than Revelation Biosciences. The stock trades about -0.23 of its potential returns per unit of risk. The Revelation Biosciences is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  1.26  in Revelation Biosciences on October 6, 2024 and sell it today you would earn a total of  0.00  from holding Revelation Biosciences or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.12%
Values	Daily Returns

NextCure  vs.  Revelation Biosciences

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.

Revelation Biosciences

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Revelation Biosciences are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly uncertain fundamental drivers, Revelation Biosciences showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextCure and Revelation Biosciences

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

The idea behind NextCure and Revelation Biosciences 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.