Correlation Between Legend Biotech and Cerevel Therapeutics
Can any of the company-specific risk be diversified away by investing in both Legend Biotech and Cerevel Therapeutics 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 Cerevel Therapeutics 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 Cerevel Therapeutics Holdings, you can compare the effects of market volatilities on Legend Biotech and Cerevel Therapeutics 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 Cerevel Therapeutics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend Biotech and Cerevel Therapeutics.
Diversification Opportunities for Legend Biotech and Cerevel Therapeutics
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Legend and Cerevel is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Legend Biotech Corp and Cerevel Therapeutics Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cerevel Therapeutics 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 Cerevel Therapeutics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cerevel Therapeutics has no effect on the direction of Legend Biotech i.e., Legend Biotech and Cerevel Therapeutics go up and down completely randomly.
Pair Corralation between Legend Biotech and Cerevel Therapeutics
Given the investment horizon of 90 days Legend Biotech Corp is expected to generate 0.48 times more return on investment than Cerevel Therapeutics. However, Legend Biotech Corp is 2.07 times less risky than Cerevel Therapeutics. It trades about 0.0 of its potential returns per unit of risk. Cerevel Therapeutics Holdings is currently generating about -0.03 per unit of risk. If you would invest 4,966 in Legend Biotech Corp on August 27, 2024 and sell it today you would lose (872.00) from holding Legend Biotech Corp or give up 17.56% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 82.42% |
| Values | Daily Returns |
Legend Biotech Corp vs. Cerevel Therapeutics Holdings
Performance |
| Timeline |
| Legend Biotech Corp |
| Cerevel Therapeutics |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Legend Biotech and Cerevel Therapeutics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legend Biotech and Cerevel Therapeutics
The main advantage of trading using opposite Legend Biotech and Cerevel Therapeutics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legend Biotech position performs unexpectedly, Cerevel Therapeutics 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 Cerevel Therapeutics will offset losses from the drop in Cerevel Therapeutics' long position.| Legend Biotech vs. Eliem Therapeutics | Legend Biotech vs. HCW Biologics | Legend Biotech vs. Scpharmaceuticals | Legend Biotech vs. Milestone Pharmaceuticals |
| Cerevel Therapeutics vs. Avidity Biosciences | Cerevel Therapeutics vs. Revolution Medicines | Cerevel Therapeutics vs. Day One Biopharmaceuticals | Cerevel Therapeutics vs. SpringWorks Therapeutics |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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