Correlation Between X4 Pharmaceuticals and Nuvalent

Can any of the company-specific risk be diversified away by investing in both X4 Pharmaceuticals and Nuvalent 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 X4 Pharmaceuticals and Nuvalent into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between X4 Pharmaceuticals and Nuvalent, you can compare the effects of market volatilities on X4 Pharmaceuticals and Nuvalent 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 X4 Pharmaceuticals with a short position of Nuvalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of X4 Pharmaceuticals and Nuvalent.

Diversification Opportunities for X4 Pharmaceuticals and Nuvalent

0.17

Correlation Coefficient

X4 Pharmaceuticals  Nuvalent

Average diversification

The 3 months correlation between XFOR and Nuvalent is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding X4 Pharmaceuticals and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and X4 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 X4 Pharmaceuticals are associated (or correlated) with Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of X4 Pharmaceuticals i.e., X4 Pharmaceuticals and Nuvalent go up and down completely randomly.

Pair Corralation between X4 Pharmaceuticals and Nuvalent

Given the investment horizon of 90 days X4 Pharmaceuticals is expected to generate 5.5 times more return on investment than Nuvalent. However, X4 Pharmaceuticals is 5.5 times more volatile than Nuvalent. It trades about 0.05 of its potential returns per unit of risk. Nuvalent is currently generating about -0.12 per unit of risk. If you would invest  66.00  in X4 Pharmaceuticals on September 26, 2024 and sell it today you would lose (8.00) from holding X4 Pharmaceuticals or give up 12.12% of portfolio value over 90 days.

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

X4 Pharmaceuticals  vs.  Nuvalent

X4 Pharmaceuticals

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in X4 Pharmaceuticals are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, X4 Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with X4 Pharmaceuticals and Nuvalent

The main advantage of trading using opposite X4 Pharmaceuticals and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if X4 Pharmaceuticals position performs unexpectedly, Nuvalent 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 Nuvalent will offset losses from the drop in Nuvalent's long position.

The idea behind X4 Pharmaceuticals and Nuvalent 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.