Correlation Between Caribou Biosciences and NextCure

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

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

Diversification Opportunities for Caribou Biosciences and NextCure

0.09

Correlation Coefficient

Caribou Biosciences  NextCure

Significant diversification

The 3 months correlation between Caribou and NextCure is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Caribou Biosciences and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Caribou Biosciences 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 Caribou Biosciences 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 Caribou Biosciences i.e., Caribou Biosciences and NextCure go up and down completely randomly.

Pair Corralation between Caribou Biosciences and NextCure

Given the investment horizon of 90 days Caribou Biosciences is expected to generate 1.26 times more return on investment than NextCure. However, Caribou Biosciences is 1.26 times more volatile than NextCure. It trades about -0.1 of its potential returns per unit of risk. NextCure is currently generating about -0.26 per unit of risk. If you would invest  202.00  in Caribou Biosciences on September 24, 2024 and sell it today you would lose (22.00) from holding Caribou Biosciences or give up 10.89% of portfolio value over 90 days.

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

Caribou Biosciences  vs.  NextCure

Caribou Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Caribou Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Caribou Biosciences 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 Caribou Biosciences and NextCure

The main advantage of trading using opposite Caribou Biosciences and NextCure positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Caribou Biosciences 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 Caribou Biosciences 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.