Correlation Between NextCure and Tonix Pharmaceuticals

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

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

Diversification Opportunities for NextCure and Tonix Pharmaceuticals

-0.7

Correlation Coefficient

NextCure  Tonix Pharmaceuticals

Excellent diversification

The 3 months correlation between NextCure and Tonix is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and Tonix Pharmaceuticals Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tonix Pharmaceuticals 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 Tonix Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tonix Pharmaceuticals has no effect on the direction of NextCure i.e., NextCure and Tonix Pharmaceuticals go up and down completely randomly.

Pair Corralation between NextCure and Tonix Pharmaceuticals

Given the investment horizon of 90 days NextCure is expected to under-perform the Tonix Pharmaceuticals. But the stock apears to be less risky and, when comparing its historical volatility, NextCure is 4.43 times less risky than Tonix Pharmaceuticals. The stock trades about -0.16 of its potential returns per unit of risk. The Tonix Pharmaceuticals Holding is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  15.00  in Tonix Pharmaceuticals Holding on September 20, 2024 and sell it today you would earn a total of  21.00  from holding Tonix Pharmaceuticals Holding or generate 140.0% return on investment over 90 days.

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

NextCure  vs.  Tonix Pharmaceuticals Holding

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.

Tonix Pharmaceuticals

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Tonix Pharmaceuticals Holding are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Tonix Pharmaceuticals reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NextCure and Tonix Pharmaceuticals

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

The idea behind NextCure and Tonix Pharmaceuticals Holding 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.