Correlation Between Puma Biotechnology and Nuvalent

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

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

Diversification Opportunities for Puma Biotechnology and Nuvalent

-0.36

Correlation Coefficient

Puma Biotechnology  Nuvalent

Very good diversification

The 3 months correlation between Puma and Nuvalent is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Puma Biotechnology and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and Puma Biotechnology 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 Puma Biotechnology are associated (or correlated) with Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of Puma Biotechnology i.e., Puma Biotechnology and Nuvalent go up and down completely randomly.

Pair Corralation between Puma Biotechnology and Nuvalent

Given the investment horizon of 90 days Puma Biotechnology is expected to under-perform the Nuvalent. In addition to that, Puma Biotechnology is 1.39 times more volatile than Nuvalent. It trades about -0.03 of its total potential returns per unit of risk. Nuvalent is currently generating about 0.03 per unit of volatility. If you would invest  7,971  in Nuvalent on September 16, 2024 and sell it today you would earn a total of  715.00  from holding Nuvalent or generate 8.97% return on investment over 90 days.

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

Puma Biotechnology  vs.  Nuvalent

Puma Biotechnology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Puma Biotechnology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Puma Biotechnology demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Nuvalent

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nuvalent has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in January 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Puma Biotechnology and Nuvalent

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

The idea behind Puma Biotechnology and Nuvalent 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.