Correlation Between Sure Tech and Nextage Therapeutics

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

By analyzing existing cross correlation between Sure Tech Investments LP and Nextage Therapeutics, you can compare the effects of market volatilities on Sure Tech and Nextage 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 Sure Tech with a short position of Nextage Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sure Tech and Nextage Therapeutics.

Diversification Opportunities for Sure Tech and Nextage Therapeutics

0.2

Correlation Coefficient

Sure Tech  Nextage Therapeutics

Modest diversification

The 3 months correlation between Sure and Nextage is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Sure Tech Investments LP and Nextage Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nextage Therapeutics and Sure Tech 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 Sure Tech Investments LP are associated (or correlated) with Nextage Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nextage Therapeutics has no effect on the direction of Sure Tech i.e., Sure Tech and Nextage Therapeutics go up and down completely randomly.

Pair Corralation between Sure Tech and Nextage Therapeutics

Assuming the 90 days trading horizon Sure Tech Investments LP is expected to under-perform the Nextage Therapeutics. But the stock apears to be less risky and, when comparing its historical volatility, Sure Tech Investments LP is 2.33 times less risky than Nextage Therapeutics. The stock trades about -0.05 of its potential returns per unit of risk. The Nextage Therapeutics is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  8,860  in Nextage Therapeutics on December 22, 2024 and sell it today you would earn a total of  1,250  from holding Nextage Therapeutics or generate 14.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.08%
Values	Daily Returns

Sure Tech Investments LP  vs.  Nextage Therapeutics

Sure Tech Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sure Tech Investments LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Nextage Therapeutics

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nextage Therapeutics are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Nextage Therapeutics sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sure Tech and Nextage Therapeutics

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

The idea behind Sure Tech Investments LP and Nextage 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..