Correlation Between NextCure and Diffusion Pharmaceuticals

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

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

Diversification Opportunities for NextCure and Diffusion Pharmaceuticals

0.53

Correlation Coefficient

NextCure  Diffusion Pharmaceuticals

Very weak diversification

The 3 months correlation between NextCure and Diffusion is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding NextCure and Diffusion Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Diffusion 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 Diffusion Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Diffusion Pharmaceuticals has no effect on the direction of NextCure i.e., NextCure and Diffusion Pharmaceuticals go up and down completely randomly.

Pair Corralation between NextCure and Diffusion Pharmaceuticals

If you would invest  327.00  in Diffusion Pharmaceuticals on August 28, 2024 and sell it today you would earn a total of  0.00  from holding Diffusion Pharmaceuticals or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.55%
Values	Daily Returns

NextCure  vs.  Diffusion Pharmaceuticals

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.

Diffusion Pharmaceuticals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Diffusion Pharmaceuticals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Diffusion Pharmaceuticals is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NextCure and Diffusion Pharmaceuticals

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

The idea behind NextCure and Diffusion Pharmaceuticals 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.