Correlation Between Legend Biotech and Arcutis Biotherapeutics
Can any of the company-specific risk be diversified away by investing in both Legend Biotech and Arcutis Biotherapeutics 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 Legend Biotech and Arcutis Biotherapeutics into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Legend Biotech Corp and Arcutis Biotherapeutics, you can compare the effects of market volatilities on Legend Biotech and Arcutis Biotherapeutics 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 Legend Biotech with a short position of Arcutis Biotherapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend Biotech and Arcutis Biotherapeutics.
Diversification Opportunities for Legend Biotech and Arcutis Biotherapeutics
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Legend and Arcutis is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Legend Biotech Corp and Arcutis Biotherapeutics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arcutis Biotherapeutics and Legend Biotech 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 Legend Biotech Corp are associated (or correlated) with Arcutis Biotherapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arcutis Biotherapeutics has no effect on the direction of Legend Biotech i.e., Legend Biotech and Arcutis Biotherapeutics go up and down completely randomly.
Pair Corralation between Legend Biotech and Arcutis Biotherapeutics
Given the investment horizon of 90 days Legend Biotech is expected to generate 5.04 times less return on investment than Arcutis Biotherapeutics. But when comparing it to its historical volatility, Legend Biotech Corp is 1.85 times less risky than Arcutis Biotherapeutics. It trades about 0.01 of its potential returns per unit of risk. Arcutis Biotherapeutics is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,448 in Arcutis Biotherapeutics on August 31, 2024 and sell it today you would lose (277.00) from holding Arcutis Biotherapeutics or give up 19.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Legend Biotech Corp vs. Arcutis Biotherapeutics
Performance |
| Timeline |
| Legend Biotech Corp |
| Arcutis Biotherapeutics |
Legend Biotech and Arcutis Biotherapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legend Biotech and Arcutis Biotherapeutics
The main advantage of trading using opposite Legend Biotech and Arcutis Biotherapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legend Biotech position performs unexpectedly, Arcutis Biotherapeutics 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 Arcutis Biotherapeutics will offset losses from the drop in Arcutis Biotherapeutics' long position.| Legend Biotech vs. Vaxcyte | Legend Biotech vs. Apellis Pharmaceuticals | Legend Biotech vs. Travere Therapeutics | Legend Biotech vs. Akero Therapeutics |
| Arcutis Biotherapeutics vs. Terns Pharmaceuticals | Arcutis Biotherapeutics vs. Amylyx Pharmaceuticals | Arcutis Biotherapeutics vs. Acumen Pharmaceuticals | Arcutis Biotherapeutics vs. Inozyme Pharma |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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