Correlation Between Roivant Sciences and NewAmsterdam Pharma

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

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

Diversification Opportunities for Roivant Sciences and NewAmsterdam Pharma

0.8

Correlation Coefficient

Roivant Sciences  NewAmsterdam Pharma

Very poor diversification

The 3 months correlation between Roivant and NewAmsterdam is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Roivant Sciences and NewAmsterdam Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewAmsterdam Pharma and Roivant Sciences 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 Roivant Sciences 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 Roivant Sciences i.e., Roivant Sciences and NewAmsterdam Pharma go up and down completely randomly.

Pair Corralation between Roivant Sciences and NewAmsterdam Pharma

If you would invest  1,591  in NewAmsterdam Pharma on September 2, 2024 and sell it today you would earn a total of  394.00  from holding NewAmsterdam Pharma or generate 24.76% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	1.56%
Values	Daily Returns

Roivant Sciences  vs.  NewAmsterdam Pharma

Roivant Sciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Roivant Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Roivant Sciences is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

NewAmsterdam Pharma

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 8 (%) 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 Roivant Sciences and NewAmsterdam Pharma

The main advantage of trading using opposite Roivant Sciences and NewAmsterdam Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Roivant Sciences 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 Roivant Sciences 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.

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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 Money Managers module to screen money managers from public funds and ETFs managed around the world.