Correlation Between Prothena Plc and Nurix Therapeutics

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

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

Diversification Opportunities for Prothena Plc and Nurix Therapeutics

0.65

Correlation Coefficient

Prothena Plc  Nurix Therapeutics

Poor diversification

The 3 months correlation between Prothena and Nurix is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Prothena plc and Nurix Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nurix Therapeutics and Prothena Plc 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 Prothena plc are associated (or correlated) with Nurix Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nurix Therapeutics has no effect on the direction of Prothena Plc i.e., Prothena Plc and Nurix Therapeutics go up and down completely randomly.

Pair Corralation between Prothena Plc and Nurix Therapeutics

Given the investment horizon of 90 days Prothena plc is expected to generate 2.88 times more return on investment than Nurix Therapeutics. However, Prothena Plc is 2.88 times more volatile than Nurix Therapeutics. It trades about 0.04 of its potential returns per unit of risk. Nurix Therapeutics is currently generating about -0.03 per unit of risk. If you would invest  1,393  in Prothena plc on October 6, 2024 and sell it today you would lose (6.00) from holding Prothena plc or give up 0.43% of portfolio value over 90 days.

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

Prothena plc  vs.  Nurix Therapeutics

Prothena plc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Prothena plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Prothena Plc is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Nurix Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nurix Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward indicators, Nurix Therapeutics is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Prothena Plc and Nurix Therapeutics

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

The idea behind Prothena plc and Nurix 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.