Correlation Between Nuvation Bio and Fate Therapeutics

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

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

Diversification Opportunities for Nuvation Bio and Fate Therapeutics

-0.42

Correlation Coefficient

Nuvation Bio  Fate Therapeutics

Very good diversification

The 3 months correlation between Nuvation and Fate is -0.42. Overlapping area represents the amount of risk that can be diversified away by holding Nuvation Bio and Fate Therapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fate Therapeutics 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 Fate Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fate Therapeutics has no effect on the direction of Nuvation Bio i.e., Nuvation Bio and Fate Therapeutics go up and down completely randomly.

Pair Corralation between Nuvation Bio and Fate Therapeutics

Given the investment horizon of 90 days Nuvation Bio is expected to generate 0.67 times more return on investment than Fate Therapeutics. However, Nuvation Bio is 1.48 times less risky than Fate Therapeutics. It trades about 0.05 of its potential returns per unit of risk. Fate Therapeutics is currently generating about -0.14 per unit of risk. If you would invest  247.00  in Nuvation Bio on September 26, 2024 and sell it today you would earn a total of  22.00  from holding Nuvation Bio or generate 8.91% return on investment over 90 days.

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

Nuvation Bio  vs.  Fate Therapeutics

Nuvation Bio

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvation Bio are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Nuvation Bio sustained solid returns over the last few months and may actually be approaching a breakup point.

Fate Therapeutics

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fate Therapeutics 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 rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Nuvation Bio and Fate Therapeutics

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

The idea behind Nuvation Bio and Fate 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.