Correlation Between Bolt Biotherapeutics and NextCure

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

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

Diversification Opportunities for Bolt Biotherapeutics and NextCure

0.4

Correlation Coefficient

Bolt Biotherapeutics  NextCure

Very weak diversification

The 3 months correlation between Bolt and NextCure is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Bolt Biotherapeutics and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Bolt Biotherapeutics 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 Bolt Biotherapeutics are associated (or correlated) with NextCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextCure has no effect on the direction of Bolt Biotherapeutics i.e., Bolt Biotherapeutics and NextCure go up and down completely randomly.

Pair Corralation between Bolt Biotherapeutics and NextCure

Given the investment horizon of 90 days Bolt Biotherapeutics is expected to generate 0.72 times more return on investment than NextCure. However, Bolt Biotherapeutics is 1.39 times less risky than NextCure. It trades about -0.02 of its potential returns per unit of risk. NextCure is currently generating about -0.09 per unit of risk. If you would invest  68.00  in Bolt Biotherapeutics on September 2, 2024 and sell it today you would lose (4.00) from holding Bolt Biotherapeutics or give up 5.88% of portfolio value over 90 days.

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

Bolt Biotherapeutics  vs.  NextCure

Bolt Biotherapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bolt Biotherapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable essential indicators, Bolt Biotherapeutics is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

NextCure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextCure has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Bolt Biotherapeutics and NextCure

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

The idea behind Bolt Biotherapeutics and NextCure 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.