Correlation Between Zoetis and NewAmsterdam Pharma

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

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

Diversification Opportunities for Zoetis and NewAmsterdam Pharma

-0.17

Correlation Coefficient

Zoetis  NewAmsterdam Pharma

Good diversification

The 3 months correlation between Zoetis and NewAmsterdam is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Zoetis Inc and NewAmsterdam Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewAmsterdam Pharma and Zoetis 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 Zoetis Inc 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 Zoetis i.e., Zoetis and NewAmsterdam Pharma go up and down completely randomly.

Pair Corralation between Zoetis and NewAmsterdam Pharma

Considering the 90-day investment horizon Zoetis Inc is expected to generate 0.29 times more return on investment than NewAmsterdam Pharma. However, Zoetis Inc is 3.5 times less risky than NewAmsterdam Pharma. It trades about 0.01 of its potential returns per unit of risk. NewAmsterdam Pharma is currently generating about -0.06 per unit of risk. If you would invest  16,244  in Zoetis Inc on December 31, 2024 and sell it today you would earn a total of  67.00  from holding Zoetis Inc or generate 0.41% return on investment over 90 days.

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

Zoetis Inc  vs.  NewAmsterdam Pharma

Zoetis Inc

Risk-Adjusted Performance

Weak

Over the last 90 days Zoetis Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Zoetis is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private 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 uncertain performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in May 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Zoetis and NewAmsterdam Pharma

The main advantage of trading using opposite Zoetis and NewAmsterdam Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Zoetis 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 Zoetis Inc 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.