Correlation Between Lyra Therapeutics and Nuvalent

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

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

Diversification Opportunities for Lyra Therapeutics and Nuvalent

-0.17

Correlation Coefficient

Lyra Therapeutics  Nuvalent

Good diversification

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

Pair Corralation between Lyra Therapeutics and Nuvalent

Given the investment horizon of 90 days Lyra Therapeutics is expected to under-perform the Nuvalent. In addition to that, Lyra Therapeutics is 1.5 times more volatile than Nuvalent. It trades about -0.05 of its total potential returns per unit of risk. Nuvalent is currently generating about 0.07 per unit of volatility. If you would invest  8,364  in Nuvalent on September 2, 2024 and sell it today you would earn a total of  1,304  from holding Nuvalent or generate 15.59% return on investment over 90 days.

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

Lyra Therapeutics  vs.  Nuvalent

Lyra Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lyra Therapeutics 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 somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Nuvalent

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvalent are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Nuvalent disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyra Therapeutics and Nuvalent

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

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.