Correlation Between Trevi Therapeutics and NextCure

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

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

Diversification Opportunities for Trevi Therapeutics and NextCure

0.82

Correlation Coefficient

Trevi Therapeutics  NextCure

Very poor diversification

The 3 months correlation between Trevi and NextCure is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Trevi Therapeutics and NextCure in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextCure and Trevi Therapeutics 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 Trevi Therapeutics are associated (or correlated) with NextCure. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextCure has no effect on the direction of Trevi Therapeutics i.e., Trevi Therapeutics and NextCure go up and down completely randomly.

Pair Corralation between Trevi Therapeutics and NextCure

Given the investment horizon of 90 days Trevi Therapeutics is expected to generate 2.1 times less return on investment than NextCure. But when comparing it to its historical volatility, Trevi Therapeutics is 1.81 times less risky than NextCure. It trades about 0.19 of its potential returns per unit of risk. NextCure is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  520.00  in NextCure on August 5, 2025 and sell it today you would earn a total of  740.00  from holding NextCure or generate 142.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.46%
Values	Daily Returns

Trevi Therapeutics  vs.  NextCure

Trevi Therapeutics

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Trevi Therapeutics are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Trevi Therapeutics demonstrated solid returns over the last few months and may actually be approaching a breakup point.

NextCure

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in NextCure are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, NextCure exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trevi Therapeutics and NextCure

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

The idea behind Trevi Therapeutics and NextCure 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.

Check out your portfolio center.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..