Correlation Between Arcus Biosciences and Nuvation Bio

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

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

Diversification Opportunities for Arcus Biosciences and Nuvation Bio

-0.28

Correlation Coefficient

Arcus Biosciences  Nuvation Bio

Very good diversification

The 3 months correlation between Arcus and Nuvation is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Arcus Biosciences and Nuvation Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvation Bio and Arcus Biosciences 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 Arcus Biosciences are associated (or correlated) with Nuvation Bio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvation Bio has no effect on the direction of Arcus Biosciences i.e., Arcus Biosciences and Nuvation Bio go up and down completely randomly.

Pair Corralation between Arcus Biosciences and Nuvation Bio

Given the investment horizon of 90 days Arcus Biosciences is expected to under-perform the Nuvation Bio. But the stock apears to be less risky and, when comparing its historical volatility, Arcus Biosciences is 1.89 times less risky than Nuvation Bio. The stock trades about -0.22 of its potential returns per unit of risk. The Nuvation Bio is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  280.00  in Nuvation Bio on October 10, 2024 and sell it today you would earn a total of  45.00  from holding Nuvation Bio or generate 16.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Arcus Biosciences  vs.  Nuvation Bio

Arcus Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arcus Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Nuvation Bio

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvation Bio are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nuvation Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arcus Biosciences and Nuvation Bio

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

The idea behind Arcus Biosciences and Nuvation Bio 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.