Correlation Between NextCure and BWV

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

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

Diversification Opportunities for NextCure and BWV

-0.39

Correlation Coefficient

NextCure  BWV

Very good diversification

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

Pair Corralation between NextCure and BWV

Given the investment horizon of 90 days NextCure is expected to generate 3.78 times less return on investment than BWV. But when comparing it to its historical volatility, NextCure is 1.57 times less risky than BWV. It trades about 0.02 of its potential returns per unit of risk. BWV is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  101.00  in BWV on September 14, 2024 and sell it today you would earn a total of  11.00  from holding BWV or generate 10.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	29.15%
Values	Daily Returns

NextCure  vs.  BWV

NextCure

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NextCure 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.

BWV

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with NextCure and BWV

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

The idea behind NextCure and BWV 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..