Correlation Between Century Therapeutics and Nkarta

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

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

Diversification Opportunities for Century Therapeutics and Nkarta

0.72

Correlation Coefficient

Century Therapeutics  Nkarta

Poor diversification

The 3 months correlation between Century and Nkarta is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Century Therapeutics and Nkarta Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nkarta Inc and Century Therapeutics 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 Century Therapeutics are associated (or correlated) with Nkarta. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nkarta Inc has no effect on the direction of Century Therapeutics i.e., Century Therapeutics and Nkarta go up and down completely randomly.

Pair Corralation between Century Therapeutics and Nkarta

Given the investment horizon of 90 days Century Therapeutics is expected to generate 1.01 times more return on investment than Nkarta. However, Century Therapeutics is 1.01 times more volatile than Nkarta Inc. It trades about 0.04 of its potential returns per unit of risk. Nkarta Inc is currently generating about -0.15 per unit of risk. If you would invest  164.00  in Century Therapeutics on September 1, 2024 and sell it today you would earn a total of  8.00  from holding Century Therapeutics or generate 4.88% return on investment over 90 days.

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

Century Therapeutics  vs.  Nkarta Inc

Century Therapeutics

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Century Therapeutics are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Century Therapeutics exhibited solid returns over the last few months and may actually be approaching a breakup point.

Nkarta Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nkarta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Century Therapeutics and Nkarta

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

The idea behind Century Therapeutics and Nkarta Inc 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.