Correlation Between Sana Biotechnology and Nuvalent

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

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

Diversification Opportunities for Sana Biotechnology and Nuvalent

0.79

Correlation Coefficient

Sana Biotechnology  Nuvalent

Poor diversification

The 3 months correlation between Sana and Nuvalent is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Sana Biotechnology and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent and Sana 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 Sana 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 Sana Biotechnology i.e., Sana Biotechnology and Nuvalent go up and down completely randomly.

Pair Corralation between Sana Biotechnology and Nuvalent

Given the investment horizon of 90 days Sana Biotechnology is expected to under-perform the Nuvalent. In addition to that, Sana Biotechnology is 3.4 times more volatile than Nuvalent. It trades about -0.24 of its total potential returns per unit of risk. Nuvalent is currently generating about -0.29 per unit of volatility. If you would invest  9,562  in Nuvalent on September 24, 2024 and sell it today you would lose (1,140) from holding Nuvalent or give up 11.92% of portfolio value over 90 days.

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

Sana Biotechnology  vs.  Nuvalent

Sana Biotechnology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sana Biotechnology has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat 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.

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 unsteady 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 Sana Biotechnology and Nuvalent

The main advantage of trading using opposite Sana Biotechnology and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sana 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 Sana 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.