Correlation Between Legend Biotech and ProPhase Labs
Can any of the company-specific risk be diversified away by investing in both Legend Biotech and ProPhase Labs 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 ProPhase Labs 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 ProPhase Labs, you can compare the effects of market volatilities on Legend Biotech and ProPhase Labs 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 ProPhase Labs. Check out your portfolio center. Please also check ongoing floating volatility patterns of Legend Biotech and ProPhase Labs.
Diversification Opportunities for Legend Biotech and ProPhase Labs
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Legend and ProPhase is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Legend Biotech Corp and ProPhase Labs in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ProPhase Labs 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 ProPhase Labs. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ProPhase Labs has no effect on the direction of Legend Biotech i.e., Legend Biotech and ProPhase Labs go up and down completely randomly.
Pair Corralation between Legend Biotech and ProPhase Labs
Given the investment horizon of 90 days Legend Biotech Corp is expected to generate 0.56 times more return on investment than ProPhase Labs. However, Legend Biotech Corp is 1.79 times less risky than ProPhase Labs. It trades about -0.03 of its potential returns per unit of risk. ProPhase Labs is currently generating about -0.1 per unit of risk. If you would invest 6,762 in Legend Biotech Corp on September 1, 2024 and sell it today you would lose (2,555) from holding Legend Biotech Corp or give up 37.78% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Legend Biotech Corp vs. ProPhase Labs
Performance |
| Timeline |
| Legend Biotech Corp |
| ProPhase Labs |
Legend Biotech and ProPhase Labs Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Legend Biotech and ProPhase Labs
The main advantage of trading using opposite Legend Biotech and ProPhase Labs positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Legend Biotech position performs unexpectedly, ProPhase Labs 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 ProPhase Labs will offset losses from the drop in ProPhase Labs' long position.| Legend Biotech vs. Vaxcyte | Legend Biotech vs. Apellis Pharmaceuticals | Legend Biotech vs. Travere Therapeutics | Legend Biotech vs. Akero Therapeutics |
| ProPhase Labs vs. Star Equity Holdings | ProPhase Labs vs. Enzo Biochem | ProPhase Labs vs. Neuronetics | ProPhase Labs vs. Intelligent Bio Solutions |
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..
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