Correlation Between Aldel Financial and Nuvalent

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

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

Diversification Opportunities for Aldel Financial and Nuvalent

0.44

Correlation Coefficient

Aldel Financial  Nuvalent

Very weak diversification

The 3 months correlation between Aldel and Nuvalent is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Aldel Financial II and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and Aldel Financial 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 Aldel Financial II 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 Aldel Financial i.e., Aldel Financial and Nuvalent go up and down completely randomly.

Pair Corralation between Aldel Financial and Nuvalent

Assuming the 90 days horizon Aldel Financial II is expected to generate 0.05 times more return on investment than Nuvalent. However, Aldel Financial II is 19.42 times less risky than Nuvalent. It trades about 0.08 of its potential returns per unit of risk. Nuvalent is currently generating about -0.13 per unit of risk. If you would invest  999.00  in Aldel Financial II on September 23, 2024 and sell it today you would earn a total of  4.00  from holding Aldel Financial II or generate 0.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	67.69%
Values	Daily Returns

Aldel Financial II  vs.  Nuvalent

Aldel Financial II

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Aldel Financial II are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Aldel Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

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 weak 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 Aldel Financial and Nuvalent

The main advantage of trading using opposite Aldel Financial and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aldel Financial 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 Aldel Financial II 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.

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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.