Correlation Between NGM Biopharmaceutica and Century Therapeutics

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

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

Diversification Opportunities for NGM Biopharmaceutica and Century Therapeutics

0.67

Correlation Coefficient

NGM Biopharmaceutica  Century Therapeutics

Poor diversification

The 3 months correlation between NGM and Century is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding NGM Biopharmaceuticals and Century Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Therapeutics and NGM Biopharmaceutica 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 NGM Biopharmaceuticals are associated (or correlated) with Century Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Therapeutics has no effect on the direction of NGM Biopharmaceutica i.e., NGM Biopharmaceutica and Century Therapeutics go up and down completely randomly.

Pair Corralation between NGM Biopharmaceutica and Century Therapeutics

If you would invest  176.00  in Century Therapeutics on August 30, 2024 and sell it today you would lose (13.00) from holding Century Therapeutics or give up 7.39% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

NGM Biopharmaceuticals  vs.  Century Therapeutics

NGM Biopharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NGM Biopharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, NGM Biopharmaceutica is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Century Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Century Therapeutics has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Century Therapeutics is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NGM Biopharmaceutica and Century Therapeutics

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

The idea behind NGM Biopharmaceuticals and Century Therapeutics 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.