Correlation Between NextCure and Replimune

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

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

Diversification Opportunities for NextCure and Replimune

-0.64

Correlation Coefficient

NextCure  Replimune

Excellent diversification

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

Pair Corralation between NextCure and Replimune

Given the investment horizon of 90 days NextCure is expected to under-perform the Replimune. But the stock apears to be less risky and, when comparing its historical volatility, NextCure is 1.58 times less risky than Replimune. The stock trades about -0.09 of its potential returns per unit of risk. The Replimune Group is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,028  in Replimune Group on August 31, 2024 and sell it today you would earn a total of  380.00  from holding Replimune Group or generate 36.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

NextCure  vs.  Replimune Group

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 December 2024. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Replimune Group

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Replimune Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Replimune disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextCure and Replimune

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

The idea behind NextCure and Replimune Group 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.