Correlation Between Generation Bio and Nkarta

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

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

Diversification Opportunities for Generation Bio and Nkarta

0.7

Correlation Coefficient

Generation Bio  Nkarta

Poor diversification

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

Pair Corralation between Generation Bio and Nkarta

Given the investment horizon of 90 days Generation Bio Co is expected to generate 1.07 times more return on investment than Nkarta. However, Generation Bio is 1.07 times more volatile than Nkarta Inc. It trades about -0.2 of its potential returns per unit of risk. Nkarta Inc is currently generating about -0.22 per unit of risk. If you would invest  286.00  in Generation Bio Co on July 21, 2024 and sell it today you would lose (60.00) from holding Generation Bio Co or give up 20.98% of portfolio value over 90 days.

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

Generation Bio Co  vs.  Nkarta Inc

Generation Bio

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Generation Bio Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Nkarta Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nkarta Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in November 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Generation Bio and Nkarta

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

The idea behind Generation Bio Co and Nkarta Inc 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.