Correlation Between Nuvalent and Icosavax

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

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

Diversification Opportunities for Nuvalent and Icosavax

0.39

Correlation Coefficient

Nuvalent  Icosavax

Weak diversification

The 3 months correlation between Nuvalent and Icosavax is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Nuvalent and Icosavax in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Icosavax 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 Icosavax. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Icosavax has no effect on the direction of Nuvalent i.e., Nuvalent and Icosavax go up and down completely randomly.

Pair Corralation between Nuvalent and Icosavax

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	Very Weak
Accuracy	1.56%
Values	Daily Returns

Nuvalent  vs.  Icosavax

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.

Icosavax

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Nuvalent and Icosavax

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

The idea behind Nuvalent and Icosavax 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.