Correlation Between Ovid Therapeutics and NextCure

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

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

Diversification Opportunities for Ovid Therapeutics and NextCure

0.24

Correlation Coefficient

Ovid Therapeutics  NextCure

Modest diversification

The 3 months correlation between Ovid and NextCure is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Ovid Therapeutics and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Ovid Therapeutics 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 Ovid Therapeutics are associated (or correlated) with NextCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextCure has no effect on the direction of Ovid Therapeutics i.e., Ovid Therapeutics and NextCure go up and down completely randomly.

Pair Corralation between Ovid Therapeutics and NextCure

Given the investment horizon of 90 days Ovid Therapeutics is expected to generate 1.19 times more return on investment than NextCure. However, Ovid Therapeutics is 1.19 times more volatile than NextCure. It trades about 0.02 of its potential returns per unit of risk. NextCure is currently generating about 0.01 per unit of risk. If you would invest  184.00  in Ovid Therapeutics on September 2, 2024 and sell it today you would lose (70.00) from holding Ovid Therapeutics or give up 38.04% of portfolio value over 90 days.

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

Ovid Therapeutics  vs.  NextCure

Ovid Therapeutics

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Ovid Therapeutics are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Ovid Therapeutics may actually be approaching a critical reversion point that can send shares even higher in January 2025.

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

Pair Trading with Ovid Therapeutics and NextCure

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

The idea behind Ovid Therapeutics and NextCure 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.