Correlation Between Legend Biotech and Nuvalent
Can any of the company-specific risk be diversified away by investing in both Legend Biotech and Nuvalent 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 Nuvalent 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 Nuvalent, you can compare the effects of market volatilities on Legend Biotech and Nuvalent 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 Nuvalent. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend Biotech and Nuvalent.
Diversification Opportunities for Legend Biotech and Nuvalent
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Legend and Nuvalent is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Legend Biotech Corp and Nuvalent in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nuvalent 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 Nuvalent. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nuvalent has no effect on the direction of Legend Biotech i.e., Legend Biotech and Nuvalent go up and down completely randomly.
Pair Corralation between Legend Biotech and Nuvalent
Given the investment horizon of 90 days Legend Biotech is expected to generate 1.05 times less return on investment than Nuvalent. In addition to that, Legend Biotech is 1.04 times more volatile than Nuvalent. It trades about 0.17 of its total potential returns per unit of risk. Nuvalent is currently generating about 0.19 per unit of volatility. If you would invest 7,825 in Nuvalent on November 9, 2024 and sell it today you would earn a total of 845.00 from holding Nuvalent or generate 10.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legend Biotech Corp vs. Nuvalent
Performance |
| Timeline |
| Legend Biotech Corp |
| Nuvalent |
Legend Biotech and Nuvalent Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legend Biotech and Nuvalent
The main advantage of trading using opposite Legend Biotech and Nuvalent positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legend Biotech position performs unexpectedly, Nuvalent 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 Nuvalent will offset losses from the drop in Nuvalent's long position.| Legend Biotech vs. Vaxcyte | Legend Biotech vs. Apellis Pharmaceuticals | Legend Biotech vs. Travere Therapeutics | Legend Biotech vs. Akero Therapeutics |
| Nuvalent vs. Arcellx | Nuvalent vs. Vaxcyte | Nuvalent vs. Viridian Therapeutics | Nuvalent vs. Ventyx Biosciences |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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