Correlation Between NextCure and ESSA Pharma

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

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

Diversification Opportunities for NextCure and ESSA Pharma

0.64

Correlation Coefficient

NextCure  ESSA Pharma

Poor diversification

The 3 months correlation between NextCure and ESSA is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and ESSA Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ESSA Pharma 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 ESSA Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ESSA Pharma has no effect on the direction of NextCure i.e., NextCure and ESSA Pharma go up and down completely randomly.

Pair Corralation between NextCure and ESSA Pharma

Given the investment horizon of 90 days NextCure is expected to generate 0.36 times more return on investment than ESSA Pharma. However, NextCure is 2.74 times less risky than ESSA Pharma. It trades about -0.07 of its potential returns per unit of risk. ESSA Pharma is currently generating about -0.12 per unit of risk. If you would invest  140.00  in NextCure on September 13, 2024 and sell it today you would lose (27.00) from holding NextCure or give up 19.29% of portfolio value over 90 days.

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

NextCure  vs.  ESSA Pharma

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.

ESSA Pharma

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ESSA Pharma has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with NextCure and ESSA Pharma

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

The idea behind NextCure and ESSA Pharma 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.