Correlation Between Terns Pharmaceuticals and Nuvation Bio

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

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

Diversification Opportunities for Terns Pharmaceuticals and Nuvation Bio

0.06

Correlation Coefficient

Terns Pharmaceuticals  Nuvation Bio

Significant diversification

The 3 months correlation between Terns and Nuvation is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Terns Pharmaceuticals and Nuvation Bio in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvation Bio and Terns Pharmaceuticals 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 Terns Pharmaceuticals 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 Terns Pharmaceuticals i.e., Terns Pharmaceuticals and Nuvation Bio go up and down completely randomly.

Pair Corralation between Terns Pharmaceuticals and Nuvation Bio

Given the investment horizon of 90 days Terns Pharmaceuticals is expected to generate 1.59 times more return on investment than Nuvation Bio. However, Terns Pharmaceuticals is 1.59 times more volatile than Nuvation Bio. It trades about 0.05 of its potential returns per unit of risk. Nuvation Bio is currently generating about -0.13 per unit of risk. If you would invest  655.00  in Terns Pharmaceuticals on September 15, 2024 and sell it today you would earn a total of  18.00  from holding Terns Pharmaceuticals or generate 2.75% return on investment over 90 days.

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

Terns Pharmaceuticals  vs.  Nuvation Bio

Terns Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terns Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of uncertain performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Nuvation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvation Bio 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.

Pair Trading with Terns Pharmaceuticals and Nuvation Bio

The main advantage of trading using opposite Terns Pharmaceuticals and Nuvation Bio positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terns Pharmaceuticals 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 Terns Pharmaceuticals 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.