Correlation Between Scilex Holding and NewAmsterdam Pharma

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

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

Diversification Opportunities for Scilex Holding and NewAmsterdam Pharma

0.08

Correlation Coefficient

Scilex Holding  NewAmsterdam Pharma

Significant diversification

The 3 months correlation between Scilex and NewAmsterdam is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Scilex Holding and NewAmsterdam Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewAmsterdam Pharma and Scilex Holding 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 Scilex Holding 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 Scilex Holding i.e., Scilex Holding and NewAmsterdam Pharma go up and down completely randomly.

Pair Corralation between Scilex Holding and NewAmsterdam Pharma

Assuming the 90 days horizon Scilex Holding is expected to generate 5.24 times more return on investment than NewAmsterdam Pharma. However, Scilex Holding is 5.24 times more volatile than NewAmsterdam Pharma. It trades about 0.0 of its potential returns per unit of risk. NewAmsterdam Pharma is currently generating about -0.08 per unit of risk. If you would invest  21.00  in Scilex Holding on December 31, 2024 and sell it today you would lose (11.00) from holding Scilex Holding or give up 52.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.08%
Values	Daily Returns

Scilex Holding  vs.  NewAmsterdam Pharma

Scilex Holding

Risk-Adjusted Performance

Very Weak

Over the last 90 days Scilex Holding has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Scilex Holding 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

Very Weak

Over the last 90 days NewAmsterdam Pharma 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 primary indicators remain comparatively stable which may send shares a bit higher in May 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Scilex Holding and NewAmsterdam Pharma

The main advantage of trading using opposite Scilex Holding and NewAmsterdam Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Scilex Holding 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 Scilex Holding 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.