Correlation Between Nkarta and NewAmsterdam Pharma

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

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

Diversification Opportunities for Nkarta and NewAmsterdam Pharma

-0.74

Correlation Coefficient

Nkarta  NewAmsterdam Pharma

Pay attention - limited upside

The 3 months correlation between Nkarta and NewAmsterdam is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Nkarta Inc and NewAmsterdam Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NewAmsterdam Pharma and Nkarta 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 Nkarta Inc are associated (or correlated) with NewAmsterdam Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NewAmsterdam Pharma has no effect on the direction of Nkarta i.e., Nkarta and NewAmsterdam Pharma go up and down completely randomly.

Pair Corralation between Nkarta and NewAmsterdam Pharma

Given the investment horizon of 90 days Nkarta Inc is expected to under-perform the NewAmsterdam Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Nkarta Inc is 1.28 times less risky than NewAmsterdam Pharma. The stock trades about -0.15 of its potential returns per unit of risk. The NewAmsterdam Pharma is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  684.00  in NewAmsterdam Pharma on August 30, 2024 and sell it today you would earn a total of  285.00  from holding NewAmsterdam Pharma or generate 41.67% return on investment over 90 days.

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

Nkarta Inc  vs.  NewAmsterdam Pharma

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 weak 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.

NewAmsterdam Pharma

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NewAmsterdam Pharma are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, NewAmsterdam Pharma showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nkarta and NewAmsterdam Pharma

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

The idea behind Nkarta Inc and NewAmsterdam Pharma 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.

Check out your portfolio center.

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.