Correlation Between Nuvation Bio and Western Midstream

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

By analyzing existing cross correlation between Nuvation Bio and Western Midstream Partners, you can compare the effects of market volatilities on Nuvation Bio and Western Midstream 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 Western Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nuvation Bio and Western Midstream.

Diversification Opportunities for Nuvation Bio and Western Midstream

0.24

Correlation Coefficient

Nuvation Bio  Western Midstream

Modest diversification

The 3 months correlation between Nuvation and Western is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Nuvation Bio and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream 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 Western Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Midstream has no effect on the direction of Nuvation Bio i.e., Nuvation Bio and Western Midstream go up and down completely randomly.

Pair Corralation between Nuvation Bio and Western Midstream

Given the investment horizon of 90 days Nuvation Bio is expected to under-perform the Western Midstream. In addition to that, Nuvation Bio is 3.2 times more volatile than Western Midstream Partners. It trades about -0.02 of its total potential returns per unit of risk. Western Midstream Partners is currently generating about 0.03 per unit of volatility. If you would invest  3,796  in Western Midstream Partners on September 12, 2024 and sell it today you would earn a total of  78.00  from holding Western Midstream Partners or generate 2.05% return on investment over 90 days.

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

Nuvation Bio  vs.  Western Midstream Partners

Nuvation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvation Bio has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Nuvation Bio is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Western Midstream

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Western Midstream Partners are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Western Midstream is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Nuvation Bio and Western Midstream

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

The idea behind Nuvation Bio and Western Midstream Partners 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.