Correlation Between Nuvalent and Cogent Biosciences

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

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

Diversification Opportunities for Nuvalent and Cogent Biosciences

0.19

Correlation Coefficient

Nuvalent  Cogent Biosciences

Average diversification

The 3 months correlation between Nuvalent and Cogent is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Cogent Biosciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogent Biosciences and Nuvalent 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 Nuvalent are associated (or correlated) with Cogent Biosciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogent Biosciences has no effect on the direction of Nuvalent i.e., Nuvalent and Cogent Biosciences go up and down completely randomly.

Pair Corralation between Nuvalent and Cogent Biosciences

Given the investment horizon of 90 days Nuvalent is expected to generate 1.28 times more return on investment than Cogent Biosciences. However, Nuvalent is 1.28 times more volatile than Cogent Biosciences. It trades about 0.07 of its potential returns per unit of risk. Cogent Biosciences is currently generating about -0.05 per unit of risk. If you would invest  8,364  in Nuvalent on September 2, 2024 and sell it today you would earn a total of  1,304  from holding Nuvalent or generate 15.59% return on investment over 90 days.

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

Nuvalent  vs.  Cogent Biosciences

Nuvalent

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nuvalent are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Nuvalent disclosed solid returns over the last few months and may actually be approaching a breakup point.

Cogent Biosciences

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cogent Biosciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Nuvalent and Cogent Biosciences

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

The idea behind Nuvalent and Cogent Biosciences 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.