Correlation Between ProMIS Neurosciences and NewAmsterdam Pharma

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

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

Diversification Opportunities for ProMIS Neurosciences and NewAmsterdam Pharma

-0.55

Correlation Coefficient

ProMIS Neurosciences  NewAmsterdam Pharma

Excellent diversification

The 3 months correlation between ProMIS and NewAmsterdam is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding ProMIS Neurosciences and NewAmsterdam Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewAmsterdam Pharma and ProMIS Neurosciences 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 ProMIS Neurosciences are associated (or correlated) with NewAmsterdam Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewAmsterdam Pharma has no effect on the direction of ProMIS Neurosciences i.e., ProMIS Neurosciences and NewAmsterdam Pharma go up and down completely randomly.

Pair Corralation between ProMIS Neurosciences and NewAmsterdam Pharma

Considering the 90-day investment horizon ProMIS Neurosciences is expected to generate 5.29 times less return on investment than NewAmsterdam Pharma. But when comparing it to its historical volatility, ProMIS Neurosciences is 3.03 times less risky than NewAmsterdam Pharma. It trades about 0.13 of its potential returns per unit of risk. NewAmsterdam Pharma is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  1,835  in NewAmsterdam Pharma on October 7, 2024 and sell it today you would earn a total of  759.00  from holding NewAmsterdam Pharma or generate 41.36% return on investment over 90 days.

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

ProMIS Neurosciences  vs.  NewAmsterdam Pharma

ProMIS Neurosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ProMIS Neurosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, ProMIS Neurosciences is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

NewAmsterdam Pharma

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak primary indicators, NewAmsterdam Pharma unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ProMIS Neurosciences and NewAmsterdam Pharma

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

The idea behind ProMIS Neurosciences and NewAmsterdam Pharma 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.