Correlation Between Nuvation Bio and Eton Pharmaceuticals

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

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

Diversification Opportunities for Nuvation Bio and Eton Pharmaceuticals

-0.11

Correlation Coefficient

Nuvation Bio  Eton Pharmaceuticals

Good diversification

The 3 months correlation between Nuvation and Eton is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Nuvation Bio and Eton Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eton Pharmaceuticals and Nuvation Bio 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 Nuvation Bio are associated (or correlated) with Eton Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eton Pharmaceuticals has no effect on the direction of Nuvation Bio i.e., Nuvation Bio and Eton Pharmaceuticals go up and down completely randomly.

Pair Corralation between Nuvation Bio and Eton Pharmaceuticals

Given the investment horizon of 90 days Nuvation Bio is expected to generate 17.7 times less return on investment than Eton Pharmaceuticals. In addition to that, Nuvation Bio is 1.11 times more volatile than Eton Pharmaceuticals. It trades about 0.02 of its total potential returns per unit of risk. Eton Pharmaceuticals is currently generating about 0.39 per unit of volatility. If you would invest  461.00  in Eton Pharmaceuticals on September 4, 2024 and sell it today you would earn a total of  785.00  from holding Eton Pharmaceuticals or generate 170.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Nuvation Bio  vs.  Eton Pharmaceuticals

Nuvation Bio

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvation Bio are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Nuvation Bio is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Eton Pharmaceuticals

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Eton Pharmaceuticals are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Eton Pharmaceuticals displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nuvation Bio and Eton Pharmaceuticals

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

The idea behind Nuvation Bio and Eton Pharmaceuticals 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.